Sirius Giving Stern $200 Million In Common Stock: Responses (SIRI, XMSR)

Sirius Satellite Radio (SIRI) shares were down 6% on Wednesday after the company announced it's granting shock jock Howard Stern $200 million in common shares (not prefered nor vested), which he can sell on the open market at any time. The stock recovered yesterday on more favorable news -- SIRI CEO Mel Karmazin is buying a million shares of SIRI. (Interesting timing, Mel...)

Responses to the Stern stock acquisition:

● Alan Murray (Wall St. Journal): 'it isn't my money. It's the money of Sirius's shareholders. And as long as they don't have to listen to this stuff, they are making out quite well... when the Stern deal was signed in October 2004, Sirius had only 600,000 subscribers and was expecting to have slightly more than two million by the end of last year and 3.5 million by the end of 2006. Instead, it now has 3.3 million and is looking to have six million at year end. That will mean revenue for this year some $200 million higher than expected at the time the Stern deal was inked -- easily enough to cover his paycheck.'

● Loren Steffy (Houston Chronicle): 'It's the kind of money that makes even the happiest of shareholders question a person's value. Is anyone, even an entertainer, worth $500 million, especially when his debut is marked with Strauss' Also Sprach Zarathustra set to flatulence?'

● Rick Aristotle Munarriz (Motley Fool): 'Shares of rival XM Satellite Radio (XMSR) closed at $29.48 the day before Stern announced that he would be turning to Sirius once his deal with Viacom ran out. That's pretty much where XM is trading today. So one stock has added $4 billion in value while the other hasn't budged. Is it all because of Stern? Most of it, yes.'

● Wall Street Fighter: 'Howard Stern is trading in your ears for cash... Whether or not he is going to sell now or not is not the issue. The issue is Sirius looks like it is still issuing stock to pay for things and they are not fully disclosing it until it is too late. I will be selling all my stock in the morning and will consider shorting it because this deal is not worth it... It's going to take a bit longer that most realize to get to profitability and meanwhile the "Stern effect" may not be as all hoped.'

● Vincent Ferrari: 'It’s not unreasonable for it to take a long time for XM or Sirius to start turning a profit, considering the huge amount of money that needs to be invested to start the network, sign talent, syndicate other shows, build studios, hire staff, etc. The interesting number, though, is subscribers. Sirius and XM started roughly at the same time, and XM is just slaughtering Sirius on subscribers. That’s a major testimonial to Sirius’ appeal to customers... Sirius is marketing to the Stern demographic because marketing to everyone else is failing miserably. If Stern fails, Sirius is done. Period. $500m in gold and trinkets plus $200m in stock? Stern practically owns Sirius at this point. If he falls flat on his face, there’s no way in the world Sirius will be able to recover.'

SIRI 1-yr chart: