Updated from May 20

Sirius ( SIRI) sold off again Wednesday morning as investors continued to flee a dilutive offering.

Testing the strong reception that pay-radio stocks have had recently on Wall Street, the company on Tuesday laid out plans to raise $125 million by selling convertible bonds. But investors who have been buying the stock in bulk took flight, pushing the stock down 13% Tuesday ahead of Wednesday's 6% plunge. Sirius recently traded at $1.07, down from Friday's $1.30 close.

Shares of the New York satellite broadcaster were hit as investors worried about potential dilution from the deal. Going by that reaction, it's clear that there's some concern about Sirius' eagerness to return to the market following March's recapitalization. But fans of the subscription radio service say the company is wisely striking while the market is hot.

Sirius will pay between 3.5% to 4% interest on the bonds, which are convertible after five years to common stock at a premium as high as 20%. The company is expected to sell an additional $26 million in bonds if demand is strong.

Shares of Sirius and rival XM ( XMSR) have risen 130% and 80%, respectively, over the past two months as investors have warmed to their cultish growth story despite their massive losses. XM shares rose 22 cents to $10.01.

In March, Sirius refinanced $1.2 billion in debt by issuing stock to creditors. The recapitalization put the company on firmer financial footing, leaving it with less than $60 million in debt and about $205 million in cash. Still, even now the company is gushing red ink. Earlier this month, the satellite subscription radio service posted a $63 million net loss on revenue of $13 million.

But at both companies the all-important metric of subscriber growth remains healthy, in keeping with Wall Street expectations. Meanwhile, both Sirius and XM have sealed key partnerships with major automakers and retailers, helping broaden the market for the radios and the 100-channel programming service they sell on a monthly subscription basis.

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