MOST READ: Sirius and XM Together at Last

The common stock offering is being conducted concurrently with a private offering by XM of $550 million of senior notes, due in 2014, which will be exchangeable into common shares of Sirius.

April Horace, an analyst with Janco Partners, said that shares of Sirius are dropping because no one expected the newly combined company to issue debt. "That wasn't expected or anticipated," she says. "Sirius' equity offering is a little confusing. The debt holders don't want to have the exposure of the exchangeable debt, so Sirius is issuing common stock shares to these debt holders so they are hedged."