(Sirius XM story updated with stock price movement and analyst insight)
NEW YORK (
shares are remaining above $1 a share after Thursday's opening bell.
Sirius XM stock is currently trading at $1.10, up 6.2% Thursday morning, after it
, breaking through the penny-stock barrier for the first time since 2008.
But what does all this really mean for Sirius XM and its investors? Jack Hain, an analyst at Barrington Research, says that first and foremost the clearing of the $1 threshold holds a significant psychological impact for Sirius XM investors -- especially institutional investors.
Institution investors, of course, are reluctant to touch stocks below $1.
And, in perhaps the most important impact, Hain noted that the stock move "reduces or almost eliminates the delisting threat" that had many investors in Sirius XM worried -- some might even say hysterical and paranoid. "Whether or not that was an actual threat remains to be seen, but we don't even have to worry about it at this point," Hain said. (Trading under a dollar despite its multibillion market cap had placed Sirius XM in a rare situation, noted Hain.)
A stock that closes above a dollar for 10 consecutive business days regains compliance with the NASDAQ.
The burning question for many interested observers is whether the stock's momentum will bring its price to levels where mutual funds will begin jumping in and buying up Sirius XM shares. Hain says that might not happen any time soon, given that mutual funds are often reluctant to get into a stock that trades under five dollars.
Any stock that trades under that amount is viewed as a stock that's not of institutional quality, Hain explains. And for Sirius to move past that level would probably require a reverse stock split -- which probably won't happen if the company's management can avoid it.
"Management is less than excited about the idea, because historically reverse splits have been viewed negatively," Hain explains. After all, reverse stock splits are often resorted to when a company wants to maintain listing standards following a fall in stock price on negative events.
Looking ahead, Hain adds that the company's outlook is, to a certain extent, now very much defined by how well the auto sector does, given that Sirius' growth has largely been driven by new auto purchases, and that the company's retail side is no longer as meaningful as it once was -- though this is less a function of failure on Sirius XM's part than a shift in the company's business strategy, Hain points out.
-- Reported by Andrea Tse in New York
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