(Associated Press via NewsEdge) Shares of US-based XM Satellite Radio Holdings and Sirius Satellite Radio plunged after the chairman of the Federal Communications Commission poured cold water on speculation that the two companies could merge.
The stocks of the two companies, which both plunged more than 40% last year, have rallied in recent weeks on talk that they could attempt to merge, despite significant regulatory hurdles.
The FCC rules that created the satellite business specifically forbid a merger between the two holders of broadcast licenses, but several analysts have held out hope that the FCC could allow an exception to the rule or change it, allowing a merger to occur.
Executives at Sirius have publicly discussed the possibility of a combination, and XM executives have not ruled it out. A merger could save the emerging industry significant costs.
However, FCC chairman Kevin Martin pointed out to reporters following a monthly meeting of the commission that the licenses granted to the satellite radio companies precluded them from being combined.
Investors took the comments to mean that Martin would not embrace the idea of changing the rules, sending the stocks of both companies plunging.
XM's shares dropped $1.69, or 9.9%, while Sirius' shares fell 7%, to $3.86, also on the Nasdaq market and also in heavy volume.
XM and Sirius had both been stock market darlings amid promises of rapid growth, even though both have suffered huge financial losses as they spend heavily to acquire subscribers and build their programming lineups.
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