Sunday, December 10, 2006

Sirius S-8 - a Deeper Look

On December 9th I did an article for which the purpose was to outline the Sirius Long Term Incentive Plan. I prefaced that article with this paragraph, and it seems that my one paragraph genererated more response than the entire long term Incentive plan. The paragraph was this:

"Sirius filed an SEC document after hours friday outlining the issuance of 40,000,000 shares. These shares were part of the 401K plan and the Long Term incentive Plan. The 401K accounted for 1,000,000 shares leaving 39,000,000 as part of the Long Term Incentive Plan. These shares can be used for many things. To help investors better understand, we are providing the long term incentive plan below. It is to early to jump to conclusions as to the "home" for these shares, but it is good to understand the plan:"

some readers pointed out that the shares were not ISSUED, and that the S-8 was a REGISTRATION FOR THE ISSUANCE of shares. The reader is 100% correct. The shares have now been registered for issuance.

My statement was not intended to state that the shares have been issued, and perhaps I should have been more clear. Personally, once the shares are registered, I tend to put those in the category of the outstanding shares, which is the same thing many do, albeit technically not correct, and for the readers, it would be best to keep the technical side of things accurate.

To be clear, these shares were registered for a purpose. There are many contracts that Sirius have that have incentive payments under the Long Term Incentive plan. to assume that those shares will be earned is something that investors need to consider when looking at an equity, and thus, many act as if they will be or already are issued. this is one reason that the fully diluted share count should be taken into consideration by investors.

Some incentive deals will be earned, and others will not. There are likely a good number of warrants that will not be earned by Sirius affiliates, but again, I tend to operate under the assumption that they can be earned until such a time that they are not. For example, the NFL has many warrants which I feel may never be earned since they are tied to the aquisition of subscribers DIRECTLY attributable to each team. If you think about how that is measured, there is basically one way for that to happen.....someone buys a Sirius radio through a LINK on an NFL team website, or buys a radio at an NFL game through a promotion. a fan walking into Best Buy because he wants to listen to his favorite team which happens to be out of market is not directly attributable, and can not be tracked.

The S-8 document filed with the SEC registers these shares for issuance. It does not mean that the shares have been issued. The reason people typically make the automatic assumption that the shares are issued is because there is no other filing needed from this point forward should they decide to issue the shares (save the major shareholder (insider) rules).

Again, the intent of the piece on the 9th was simply to outline the Long Term Incentive plan. I agree that I should have made a better choice of words in the opening paragraph, and in the future will make every attempt to be clear on such items.

12/10/2006 08:47:00 PM

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