Sirius (SIRI) Settlement Could Crush Stock

After a nice recent run, the share price of Sirius XM (NASDAQ:SIRI) could come under some heavy pressure after the terms of the settlement of a class action lawsuit against them was made public.

The settlement of the class action lawsuit wasn't a surprise, that was almost a given, but the terms will have implications for the rest of 2011, undermining expectations of shareholders which had helped drive the share price of the satellite radio company up.

Terms of the settlement were valued at about $180 million, but it won't be paid in cash, rather it will be paid in the freezing of prices to the class, which is the majority of those using the service.

As the market digests the information, it's probable the stock will take a significant hit as shareholders realize there will be no increase in price for the service in the latter part of 2011, something CEO Mel Karmazin spoke of in a conference call.

Apparently new subscribers will be able to have prices for the service increased, but the existing shareholders won't. That means little benefit for shareholders from that perspective will happen until sometime in 2012 at earliest.

It must be understood that this is a proposed settlement which the FCC will have to rule on.

That brings up another possible negative scenario for Sirius, as Federal Communications commissioner Meredith Attwell will be stepping down, which could delay the decision on the settlement concerning the price freeze.

This could cast a shadow over Sirius for the rest of the year, and possibly deep into 2012, depending on the situation with the FCC. Either way, this isn't a positive for the company or its shareholders.