Thursday, December 14, 2006
Forbes Confuses the Stern Deal
December 14, 2006
Today Forbes.com issued a story titled
The Biggest Celebrity Paydays of 2006. In the excerpt attributable to Stern, Forbes notes that Stern got $192,000,000 NET from shares issued to him on January 5, 2006.
Article Excerpt:
"Howard Stern debuts on Sirius Satellite Radio. Even before his arrival, Stern helped recruit roughly 2.7 million subscribers by touting his new gig while still on air for CBS. That earned him a Sirius stock bonus worth $192 million (net a standard capital gains tax) for exceeding subscriber targets. That bonus is on top of his $500 million, five-year contract with the satellite radio provider. Stern, who kicked the show off with the sound of flatulence, unleashed the F-bomb 68 times over the course of the first five-hour, commercial-free broadcast."The error in this piece on the part of Forbes is that the shares were NOT "on top of his $500 million, five-year contract."Review of the SEC filings notes the following:
We have directed The Bank of New York, the transfer agent for our common stock, to issue on January 9, 2006 an aggregate of 34,375,000 shares of common stock for the benefit of Howard Stern and Don Buchwald, his agent. Pursuant to our October 2004 agreement with Stern, we agreed to deliver these shares in December 2010, or earlier if as of the end of any fiscal year we exceeded agreed upon subscriber targets. Our December 31, 2005 subscriber total exceeded the subscriber target we agreed upon with Stern in October 2004.
The shares of common stock will be issued in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 and will be restricted securities as defined in the Securities Act. We intend to file a shelf registration statement with the SEC to register these shares for resale. In October 2004 we disclosed that the aggregate fixed obligations under our agreement with Stern would be approximately $100 million per year commencing in 2006. The 34,375,000 shares issued to Stern and Buchwald were valued at that time at approximately $110 million and were included as part of the aggregate fixed obligations under the agreement.The key wording in this SEC filing is "were included as part of the aggregate fixed obligations under the agreement."
Aggregate is defined as:
-amount in the aggregate to
-a sum total of many heterogenous things taken together
-gathered or tending to gather into a mass or whole; "aggregate expenses include expenses of all divisions combined for the entire year"; "the aggregated amount of indebtedness"
-sum: the whole amount
-gather in a mass, sum, or whole
-formed of separate units in a cluster; "raspberries are aggregate fruits"
Thus, the shares issued to Stern were a part of, or inclusive in the terms of the agreement. The SEC documentation clearly states that the 34,375,000 shares carried a value of roughly $110,000,000 at the time of issuance. Thus, the fixed obligations under the deal were $390,000,000 in cash payments and 34,375,000 shares.
If one looks at the documentation HERE (the 8K filed on January 5th), there is no possible way that one can infer that the shares were "on top of the $500,000,000 five-year deal."
The documentation is quite clear.
12/14/2006 12:43:00 PM
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