Stern Gets 34M Sirius Shares

The jury is still out on whether or not Sirius Satellite Radio (SIRI) got itself a good deal when it signed Howard Stern to a 5-year, $500 million deal in 2004. Shareholders though, have to question if it was smart to offer Stern and his agent shares of stock, in addition to $100 million a year for his show.

Massive dilution is nothing new to Sirius, as they give stock out without a second thought. CEO Mel Karmazin got $14 million of stock in 2004 alone. This trend explains, in part, why the company is valued at $8.5 billion despite only a $6+ stock price. There are more than 1.3 billion shares outstanding today, and that isn’t even a fully diluted number.

For those keeping track at home, the 34,375,000 share allotment to Howard and his agent, to be delivered on Monday, will be worth $220 million, or 2.6% of the company’s current market value.

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5 Thoughts on “Stern Gets 34M Sirius Shares

  1. NO DooDahs on January 5, 2006 at 10:18 AM said:

    Hey Chad, do you remember what price SIRI was at when I suggested it was a good end-of-year short on a comment here?


  2. Chad Brand on January 5, 2006 at 10:25 AM said:

    I don’t remember exactly, but my guess would be a tad over 7 bucks. Good call.

  3. NO DooDahs on January 5, 2006 at 11:52 AM said:

    Oh, while we’re at the “good call” thing, good numbers out of AEOS today …

  4. stumayer on January 6, 2006 at 9:32 AM said:

    Chad would you sell siri?

  5. Chad Brand on January 6, 2006 at 9:47 AM said:

    Personally, I cannot make the case that SIRI is worth substantially more than the current stock price, so I would not, and do not, own it myself or for my clients.

    That said, if everything that can go right does go right for them and the industry, the stock will be higher than it is today five years from now.

    For those that are confident that will occur, and want to own some of the stock, that’s what speculative positions are for. I would suggest not putting a large percentage of one’s portfolio in it though, due to the risk profile.

    All in all, given the risk profile, I would not buy it for my clients. I prefer to measure risk versus reward, and I don’t think the latter significantly trounces the former in the case of SIRI.

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