Tuesday, December 12, 2006

Joe Claytons Stock Sale Simplified

December 12, 2006

Today sirius filed an SEC Form 4 for the sale of stock by Joe Clayton. This type of transaction is oft misunbderstood, and we thought that we would take a minute to explain this type of sale.

More likely than not this sale had nothing whatsoever to do with how Joe Clayton feels about Sirius stock or the company.

Joe Clayton did a paperless transaction.

He had an option to buy 3,000,000 shares of sirius at a price of $1.04. That option expired on December 31st of this year. If he did not act on the option prior to December 31st, his option would expire and he would get nothing.

Joe Clayton had a choice 3 choices:

1. Let the options expire and receive nothing

2. Walk into Sirius with a check for $3,120,000 and buy the shares

3. Perform a paperless transaction.

The paperless transaction means that Joe does not need to walk into the Sirius offices with a check for $3,120,000. Instead, he agrees to sell enough shares to cover the excercise price, commissions and taxes. Any shares left over go into Joes holdings.

Thus, he sold 1,846,475 shares for $7,053,535.

$3,120,000 of that covered his cost to excercise options on 3,000,000 shares.

That leaves $3,933,535 to cover taxes and brokerage fees.

Joe Clayton got to keep 1,153,525 shares. He now holds 3,800,785 shares of Sirius stock.

The rational above is exactly the reason that I can pretty comfortably state that Joes sale likely has nothing to do with his sentiment about Sirius or the stock. He ADDED to his position. He sold only that which was required to aquire the shares and pay the fees and taxes.

This type of transaction happens a lot when employees receive stock options.

12/12/2006 09:52:00 PM

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