Maybe you woke up this morning and saw that Sirius XM Holdings (NASDAQ:SIRI) lost a whopping 7% in early trading. And now, as of publication, it’s back up over 4% in midday trading. What’s going on?
The stock’s volatility is the result of two things: a merger between Sirius and Liberty Sirius XM Group (Sirius XM tracking stock of Liberty Media) and the resulting highly anticipated reverse stock split.
A reverse stock split involves breaking a company’s stock into smaller units so that each share is worth more. Sirius XM’s 10-for-1 reverse stock split meant that shareholders received one share for every 10 shares they owned.
While a reverse stock split often signals fewer shares and a short-term problem, it is a good sign for the future. However, the reason for the volatility may be that while the company’s guidance remains in line with projections, Sirius has also forecast that it will generate $200 million less cash in 2024 than previously promised.
Meanwhile, the merger means that Sirius XM now has a “simplified capital structure and strategy for continued success” after a period of mixed financial results and a low stock price. And now SiriusXM is called Sirius XM Holdings and trades on the Nasdaq under the ticker symbol “SIRI.”
This “new phase” includes a nearly $1.2 billion share buyback and a promise to continue the dividend plan at about 4.3% per year, both of which could help Sirius stock recover in the short and long term.
If this all sounds familiar, you may remember the frightening number of stock splits this year at several big-name companies. With record-breaking gains, markets witnessed stock splits at Nvidia (NASDAQ: NVDA) and other AI chipmakers. Most recently, Nvidia’s 1-for-1 split occurred in June. Before that, Nvidia’s stock split occurred five times, with 2-for-1 splits in June 2000, September 2001, and April 2006. There was also a 3-for-2 split in September 2007 and a 4-for-1 split in July 2021.
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