Sirius XM Share Dilution: A Look At The Rumors

There have been numerous articles, comments and internet postings claiming that Sirius XM (SIRI) shares will be diluted, and/or near worthless when (and if) Liberty Media (LMCA) converts its preferred shares of Sirius to common shares; and then implements a Reverse Morris Trust RMT transaction. Those Liberty preferred shares represent over 40% of the total value of Sirius. According to Investopedia, the definition of stock dilution is:

A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities.

I think most investors know this, but they are getting confused between dilution and a large amount of Sirius shares hitting the market at one time. That is not dilution. That is actually a case of supply and demand. The supply of shares suddenly exceeds the demand of investors wanting to buy the company.

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