Why Sirius XM’s Stock Price Fluctuated Wildly After Reverse Stock Split

You may have woken up this morning to Sirius XM Holdings (NASDAQ: SIRI) down as much as 7% in early trading. And now, at the time of this writing, it’s back up by over 4% in midday trading. What’s going on?

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The stock’s volatility is the result of two things: a merger between Sirius and Liberty Sirius XM Group (Liberty Media’s Sirius XM tracking stock) and the resulting long-awaited reverse stock split.

A reverse stock split combines a company’s shares into fewer shares, making each one worth more. Sirius XM’s 1-for-10 reverse split means that stockholders received one share for every 10 shares they owned.

While a reverse stock split often signals fewer shares and a short-term problem, it’s good news for the future. But the reason for the volatility could be that while the company’s guidance remains in line with forecasts, Sirius also predicted that it will generate $200 million less cash in 2024 than it 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 Sirius XM Holdings, which trades on the Nasdaq under the “SIRI” stock symbol.

This “new phase” includes a nearly $1.2 billion share buyback and a pledge to continue its dividend plan of about 4.3% per year, both of which could help Sirius shares recover in the short and long term.

If this all sounds familiar, you may recall the shocking amount of stock splits this year at several prominent companies. With record-breaking gains, markets have seen stock splits at Nvidia (NASDAQ: NVDA) and other AI chipmakers. Most recently, Nvidia split 10-for-1 in June. Before that, Nvidia split five times, with 2-for-1 splits in June 2000, September 2001, and April 2006. It also had a 3-for-2 split in September 2007 and a 4-for-1 split in July 2021.

This post originally appeared on fastcompany.com
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