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

You may have woken up this morning to see Sirius XM Holdings (NASDAQ: SIRI ) down 7% in early trading. And now, at press time, it’s up more than 4% in midday trading. what’s going on

Fast Company’s Most Read

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

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

While a reverse stock split often signals less stock and a near-term problem, it signals good news for the future. But the reason for the volatility could be that while the company’s guidance remains in line with projections, Sirius also estimated it will generate $200 million less cash in 2024 than it previously promised.

Meanwhile, the merger means Sirius XM now has a “streamlined capital structure and strategy for continued success” after a period of mixed financial results and a depressed stock price. And now, SiriusXM is now Sirius XM Holdings, trading on Nasdaq under the ticker symbol “SIRI.”

This “new phase” includes a nearly $1.2 billion share buyback and a promise to continue its dividend plan of about 4.3 percent a year. Both could help Sirius stock bounce back in the short and long term.

If this all sounds familiar, you might remember the discontinuous amount of stock splits this year at several high-profile companies. With record profits, markets saw stock splits in 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
Subscribe to receive the Fast Company newsletter: http://fastcompany.com/newsletters