XM stock slides 13% on auditor report

Satellite radio co.'s filing warns of cash shortage

Investors pummeled shares of XM Satellite Radio on Tuesday after the fledgling company’s auditors warned of a looming cash shortfall.

In a year-end filing with the Securities & Exchange Commission, auditor KPMG questioned XM’s ability to continue as a “going concern” — a cautionary statement that’s been included in most of XM’s filings as a public company.

The stock fell 13.33% to $13. Over the past 52 weeks, the shares have dipped as low as $3 and jumped as high as $21 as the Los Angeles-based company fights market skepticism and heated opposition from broadcasters.

Earlier this month, the National Assn. of Broadcasters asked federal regulators to investigate whether XM was illegally airing local signals without proper licenses.

The satellite radio operator, which offers more than 100 channels (many ad free) launched in the fall after more than a decade of preparation. Its radios are included as options in some GM cars and trucks. GM’s satcaster DirecTV is an investor in XM.

In late January, XM said that it expected to have 70,00 subscribers — a subscription to XM Radio costs $9.95 a month — by the end of March and 350,000 subs by year’s end but growth has fallen short of Wall Street’s expectations. Company also said then that it had enough cash to operate through the end of 2002.

Execs insisted Tuesday that they were comfortable with the company’s ability to fund operations going forward. Auditors said XM might have to issue additional equity or debt to raise cash.

XM’s smaller competitor Sirius Satellite fell nearly 10% to $5.04 on Tuesday.

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