XM Shares Issued To Members of Management

December 20, 2006

Yesterday XM Satellite Radio brought on a new member of the Board of Directors, and also issued shares to her as well as some of the senior management.

The shares that XM issued differ slightly from the types of transactions investors recently saw from Sirius. With Sirius the shares were options, which had an exercise price, and could expire unless actions were taken by the individuals.

The shares issued by XM are restricted shares, and had no cost to the recipient whatsoever, and thus, the need for a paperless transaction does not exist.

This is a breakdown of the shares issued, as well as the total shares held by the individuals:

Joan Amble - 10,000 shares at a cost of $0 - 10,000 - Joan now holds 10,000 shares of XM.

Dara Altman - 60,000 shares at a cost of $0 - These shares are restriced, and the restricted stock vests in three equal annual installments beginning on December 15, 2007. Dara now holds 161,300 shares of XM.

Stephen Cook - 50,000 shares at a cost of $0 - These shares are restricted, and the restricted stock vests in three equal annual installments beginning on December 15, 2007. Stephen now holds 183,767 shares of XM which excludes 480,000 shares underlying vested and unvested stock options held by the Reporting Person.

Joe Euteneuer - 60,000 shares at a cost of $0 - These shares are restricted, and the restricted stock vests in three equal annual installments beginning on December 15, 2007, Joe now holds 258,488 shares of XM which excludes 500,000 shares underlying vested and unvested stock options held by the Reporting Person.

Joe Titlebaum - 25,000 shares at a cost of $0 - These shares are restricted, and the restricted stock vests in three equal annual installments beginning on December 15, 2007. Joe now holds 119,254 shares of XM which excludes 380,000 shares underlying vested and unvested stock options held by the Reporting Person.

Erik Toppenberg - 75,000 shares at a cost of $0 - These shares are restricted, and the restricted stock vests in three equal annual installments beginning on December 15, 2007. Erik now holds 202,061 shares of XM which excludes 100,000 shares underlying vested and unvested stock options held by the Reporting Person.

UPDATE:

I had a comment from a reader brought to my attention

READER COMMENT:

"Your bias against Xm continues to show. Can't you guys get anything correct? Or at least get all the details out there correctly instead of more spin? Your blog states the following,"The shares issued by XM are restricted shares, and had no cost to the recipient whatsoever, and thus, the need for a paperless transaction does not exist." This is not correct, or at least is very misleading. The shares vest in 3 equal parts over the next 3 years. When each amount vests, there will be a taxable situation in which the holder must pay capital gains taxes on the difference between the grant price and the price on the day of the vesting. Which is when you typically see employees do paperless transactions to cover the taxable event. There will very much be a "cost" to the recipient when they vest. Xm began granting restricted stock in place of stock options to its management about a couple years ago, just as many companies are doing today around the country. YOUR LINK How you can even possibly put this event as "slightly different" than what occured with Sirius mangements' cashless exercise of expiring stock options recently, is beyond comprehension. The two situations aren't even remotely similar. To claim that the difference between the two is "slight" is downright spin. Your comparison of the two shows just how desperate you are to spin all things Sirius. And why your "blog" is most likely one of those new "flog's" that are coming to light these days. Plus the fact that you dont allow public comments on your commentaries speaks volumes toward the biases of your postings, and just how out of control your flog really is. YOUR LINK Just Ask Sony!"

SSG RESPONSE

I guess the best way is to take this comment one issue at a time.

You State:
Your bias against Xm continues to show. Can't you guys get anything correct? Or at least get all the details out there correctly instead of more spin? Your blog states the following.....

SSG Response:
I have both services. I have both equities. As a consumer I do e a preference with regards to which satellite radio service I listen to most. Perhaps your perception of this site makes you feel as if there is a bias. The article was simply pointing out the fact that the transactions happened, and how it differs from the stock options transactions of sirius a few weeks ago. people love to make comparisons of these companies, and often the comparisons simply can not be made because of the difference in how things are structured does not allow for an apples to apples look.

You State:
"The shares issued by XM are restricted shares, and had no cost to the recipient whatsoever, and thus, the need for a paperless transaction does not exist." (quoting SSG)

This is not correct, or at least is very misleading. The shares vest in 3 equal parts over the next 3 years. When each amount vests, there will be a taxable situation in which the holder must pay capital gains taxes on the difference between the grant price and the price on the day of the vesting. Which is when you typically see employees do paperless transactions to cover the taxable event. There will very much be a "cost" to the recipient when they vest.

SSG Response:
The point of the article was to go over how the transactions differ, and not looking at 1, 2, or three years down the road, but since you want that level of deatil, I would be happy to assist. You charge that my statement was misleading, but it is not. The issuance of restricted shares does not trigger a paperless transaction at the time the shares are issued (in this case December 19). The holder simply has those shares set aside for them, and the shares will vest as stated (in this case over the next three years.

Your comment that there will be a cost is well off base. The holder has NO COST for the shares. That clearly sjhows in the SEC documentation. At the point that the shares vest, their tax papers will aslso CLEARLY SHOW that there is NO COST for the shares. This is called the COST BASIS, and these shares all have NO COST BASIS.

you are correct that Uncle Sam will want his portion of the CAPITAL GAIN. The CAPTIAL GAIN is determined by the price AT THE TIME OF VESTING less the COST BASIS. The COST BASIS is $0. Thus, the CAPITAL GAIN would be the share price multipleied by the number of shares that vest. At that point in time, the holder may elect to do a paperless transaction.

All of this goes into more detail than I intended, but at the end of the day there is NO COST to the shares.

You State:
Xm began granting restricted stock in place of stock options to its management about a couple years ago, just as many companies are doing today around the country. Your Link Here

SSG Response:
There are indeed many companies that issue restricted grants instead of options. There are also many companies that use options, and companies that use a combination.

You State:
How you can even possibly put this event as "slightly different" than what occured with Sirius mangements' cashless exercise of expiring stock options recently, is beyond comprehension. The two situations aren't even remotely similar. To claim that the difference between the two is "slight" is downright spin.

SSG Response:
The difference between the two events is in options to buy vs. the issuance of restricted shares. There are many factors involved in the determination of which way to issue shares. The bvottom line is that whether they are options or grants, they are designed as compensation to employees, and they are shares that will increase the float. There is no "spin" involved. Both Sirius and XM compensate employees in one form or another with stock. For you to claim a "vast difference" is simply not correct. The shares are issued as compensation, the float increases. This is not a debate about the number of shares, the value of the shares, nor whether the individuals deserve that number of shares. I had no intention of taking the issue into next year, because at this point it was not material to the intent of the article. Yes, next year 90,000 shares will vest, and some of the holders may well use a paperless transaction to pay their taxes. If XM were to be at $20, the capital gain involved would be about $1,800,000. If taxes were about half, then 45,000 shares could well be sold to cover the taxes. this however is conjecture at this point, and that was something that is better left until this time next year.

You State:
Your comparison of the two shows just how desperate you are to spin all things Sirius. And why your "blog" is most likely one of those new "flog's" that are coming to light these days. Plus the fact that you dont allow public comments on your commentaries speaks volumes toward the biases of your postings, and just how out of control your flog really is. Your Link Just ask Sony!

SSG Response:
Again, you seem to want to insinuate that there is some sort of bias here, and then go on to insinuate that SSG is a "flog" rather than a "blog". If you are insinuating that SSG has any connection to Sirius or XM, you are quite wrong, and well off base. SSG has no relationship whatsoever with either of these equities. Your comment about public comments.......Well, here is your comment alive and well in living print. You can also email us at satellitestandard@gmail.com, or use the "SSG Shout-Out" link to submit your comments. We are more than happy to publish reader comment provided they are on the subject and do not contain profanity.

SSG makes efforts to balance our coverage. A lot of what we do happens from reader submissions. More readers tend to submit information about Sirius than for XM. Additionally, because most of my satellite radio listening is on Sirius, I tend to have more day to day comments about what is playing on Sirius. When I do listen to XM, I am more than happy to cover it. The same is true for other contributors. In addition, we would always love to add additional people to the site. Readers can submit articles for consideration, and anyone interested in participating is welcomed to contact us.

Thank you for your readership, and thank you for your comments. It is my hope that the clarifications delivered here are to your satisfaction. Happy Holidays.

Labels: shares issued, xm

12/20/2006 11:18:00 AM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here

2 Comments:

• I just saw all this. You wrote "...Yes, next year 90,000 shares will vest, and some of the holders may well use a paperless transaction to pay their taxes. If XM were to be at $20, the capital gain involved would be about $18,000,000..." 90,000 x $20 = $1.8 million. Wow. You advise on money matters???

  By  Anonymous, at January 31, 2007 4:17 PM  




• Thank you for pointing out what is an obvious typographical error. I will correct it right away. The supported math clearly shows the $1,800,000.
  
  Given that a typographical error seems your only exception to what was written, I take it you agree with all else.
  
  For the record, I am not a financial advisor.

  By  SSG, at January 31, 2007 4:43 PM  

Post a Comment

SSG is not a Financial Advisor. Read Disclosure: HERE

--------------------------------------------------------