Sirius-XM Euphoria Fading

Updated from 7:19 a.m.

Wall Street didn't take long to register its approval of the proposed merger combining Sirius (SIRI Quote - Cramer on SIRI - Stock Picks) and XM (XMSR Quote - Cramer on XMSR - Stock Picks).

Shares in the satellite radio broadcasters rose early Tuesday as investors wagered that regulators will smile on an all-stock deal bringing the longtime rivals together.

The deal, announced Monday afternoon, gives XM shareholders 4.6 Sirius shares for each XM share outstanding. As announced, the transaction is worth $4.57 billion, a 22% premium to Friday's closing prices.

But the landmark merger is worth far more than that based on early trading Tuesday. Investors enthusiastically sent shares in both companies into the stratosphere in premarket action, with Sirius jumping 12% and XM soaring 30%, before those gains eroded in early regular trading.

At 9:48 a.m. EDT, Sirius was up 23 cents to $3.93, making the merger worth $18.08 an XM share, or about $4.85 billion. XM shares were up $1.39 at $15.37.

The rally marks a sharp turn from last year's action, when shares in both companies lost more than 40% of their value as growth slowed, losses mounted and new competition loomed.

So the satellite radio broadcasters, long favorites of growth investors who don't mind a walk on the speculative side, finally did Monday what many fans have demanded for months and years: They announced a merger.

The new company, whose name hasn't been announced, will be led by Sirius chief Mel Karmazin.

The question, as Tuesday's trading opens following Monday's President's Day holiday, is whether the early rally will hold up.