Seeking Alpha
Long only, research analyst, portfolio strategy, media
Profile| Send Message|
( followers)  

As of October 16, Sirius XM (NASDAQ:SIRI) CEO Mel Karmazin has completed sales of shares of company stock under his adopted trading plan. Since April, Mel has sold 90 million shares of Sirius XM that he owned through stock option awards that had vested. Mel has 30 million options left to vest by the end of the year, and 8.5 million shares of Sirius XM owned directly. His sales, which can be found here, were completed on Monday and Tuesday, with the final sale of 13.1 million shares.

Despite the sales, Sirius XM shares are up 5 cents on the week.

What was originally touted as a potential nightmare for Sirius XM investors has really been a non-event. Other than the first two sets of shares released in April and May, which contributed to selling pressure in an overall market downturn, it's as if Mel's sales have not existed to the market. They've been gobbled up on the buy side like a car running over a small pebble in the road. If you were aware of the pebble, you might have felt the bump, but for those not paying attention, it's unlikely that the bump was even noticed.

One of the reasons for this is that, despite Mel's 90 million in sales (and what is expected to be 30 million more after the close of the year), the effect of the sale has really only been half as much. This is due to the fact that these option exercises cause Liberty Media's (NASDAQ:LMCA) stake to be diluted, and thus require it to repurchase 50% of the sales to maintain its stake in Sirius XM. With Liberty's intent to gain controlling interest, Mel's sales have actually increased Liberty's buying pressure.

The sales couldn't have come at a better time, really. I know opinions on this may differ, but if I personally had a choice as to when insiders would sell their stake, now would be the time. I have absolutely no idea if the thought that Liberty would have to buy half of these shares even crossed insiders' minds when they made the decision to sell, but regardless, I am thankful for how it has worked out.

Going forward, investors can take a little bit of a breather here from expectations of insider sales in November and December. With no plans currently in place, the middle of the month no longer has that question mark stamped on it, asking if the sales will have any effect on the share price.

With Q3's conference call upon us on October 30, eyes and ears will be on Mel, whether or not he will be staying with Sirius XM, and what the terms of his contract may be if he stays. Me? I'm happy with how Mel has run Sirius XM in the past several years, and will be pleased if he stays. While some may argue that Mel has been a little slow to innovate, I think that he has done quite well with what he had available. Sirius XM is in a great place today, thanks in large part to his guiding hand. It's easy to say "I would have done differently... Mel's an incompetent old fool." It's easy to SAY a lot of things.

It's not so easy to DO what Mel has done. And I think that's worth something. Whether you stay or go, Mel, thanks very much for saving investors from bankruptcy and total loss at the depths of the market in 2009. Thanks very much for negotiating a merger between Sirius and XM that seemed nearly impossible, given the dragging out of the process by the FCC and DOJ. Thanks very much for guiding Sirius XM from those depths of near 5 cents per share to recent closing highs of $2.84 per share. For those who believed in you, and in Sirius XM, we've been rewarded well.

Source: Mel Karmazin Completes Sirius XM Stock Sales