Sirius XM: Shares Jump on Short Squeeze; No Change to Underlying Business or Valuation

Sirius XM shares jumped by over 42% on July 20 with a 6% pullback in aftermarket trading. The share price spike was not driven by any company-specific news but rather by a short squeeze in the afternoon. Roughly 34% of the limited float in Sirius XM shares were held short at the start of the day as a number of short sellers were reportedly attempting a complicated trade to capitalize on the reformulation of the Liberty Media tracking stocks. As there is no apparent change to the underlying businesses at Sirius XM, we maintain our fair value estimate of $7.50. While Sirius XM shares are now trading near our fair value, we think shares may fall from these levels as the short squeeze buyers cash out.