Sirius XM Has So Much to Gain, So Much to Lose

Shares of Sirius XM Radio (NASDAQ: SIRI  ) hit yet another five-year high earlier this week, but you wouldn't know if from the shorts that just can't seem to give up their bearish dreams.

There were 379 million shares sold short as of mid-May, and that continues to be the largest number of borrowed shares for any Nasdaq-listed company.

Sure, it's been worse. There were 414 million shares shorted when activity peaked at the end of February. However, we've come a long way since a year ago when folks had just 294.1 million bearish wagers betting against the satellite radio provider.

However, it's not fair to simply look at the raw number of shares sold short. The stock had soared 60% in the year leading up to May 15, making the money being bet against Sirius XM a lot more than it may seem like by merely exploring the share count.

 

Shares Short

Price

Value

5/15/12	294.1 million	$1.94	$570.6 million
2/28/13	414.0 million	$3.11	$1,287.5 million
5/15/13	379.0 million	$3.53	$1,337.9 million

Source: Nasdaq.

 See that?

Even though there are just 29% more shares sold short now than there were a year ago, the value of those bets have more than doubled. The more than $1.3 billion value of the short positions as of mid-May were also higher than when the share count peaked in February.

Naturally the longs have also never had as much at stake here. The stock is at a five-year high, and Sirius and XM were separate companies -- and Liberty Media (NASDAQ: LMCA  ) hadn't amassed a 40% preferred share stake that inflated the share count by 60% -- the last time that the stock was trading this high.

In short, the field is set and both sides have never had as much at stake as they collectively do right now.

This is a good time for premium radio. Pandora (NYSE: P  ) -- after years of struggling as a deficit-riddled haven for freeloaders -- is finally starting to gain traction as a pay service. Premium subscribers have more than doubled over the past year, and the stock hit a fresh 52-week high last week. Spotify is also growing quickly, and every tech giant has either announced a service or is heavily rumored to be preparing to launch one.

Against this backdrop, Sirius XM closed out its latest quarter with a record 24.4 million subscribers. The battle line is drawn, and one side is going to lose a lot of money.

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