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Thread: might be cynical or.....

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  1. #1
    jimmy66 is offline
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    might be cynical or.....

    So, as charming as Mr. Karmizan may be I seem to smell something rotten in denmark with this stock buy. On the wake of the other corporate scandals this could be the coup of all coups. Mr. Karmizan had 20 million dollars of sirius stock purchased 2 years ago purchased at 3.50 to 4 per share. so roughly 5 million shares. He is then restricted from buying for 2 years while this merger winds its way through the system and its shares take a beating. People are excited and the stock while low at 2.11 Mel still cant buy. Everyone is expecting a huge pop for share price as the merger closes and everyone will do well, except Mel. short term he would probably about break even. So how does he figure to cash in personally??
    Lets think about it, hmmm. I got it, we need to refinance some debt, so we will wait untill the merger has been approved and we will make a deal to lend equity at a huge discount and flood the market with these firesale priced shares. The loyal will scream and holler for mel or howard or sirius xm to make a big purchase. Buy 2 million shares way under real market value and lower my average share price by about a dollar or so in the process. Now as the share price rises to most analysts target mel will make another 5 to 7 million per dollar rise in price.

    genius and totally feasible if you ask me

  2. #2
    zcurzan is offline
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    Ehhh, I'm not so sure. Putting aside the fact that this debt needed to be refinanced indisputably. This company is in not negotiating from a position of strength, they needed to get this done, they needed it done fast. Sweeten the pot for the lenders.

    IMO he's just doing what he knows will support the stock price in the near term. Just like others have mentioned in the recent threads, something needed to be done to put some brakes on the plummeting stock price and the debate going was whether it was in the company's best interest to take that action, or not... enter "insider buys".

    And that's sure is a lot of hoops to jump through, not to mention pretty illegal, just to grab a couple extra million dollars long term. And the guy already makes what, $30 million a year? The guy already has money, if you are looking for the inner motivations of Mel, I'd say hes embarassed and disgusted by the current share price (as he says its the report card for the CEO). He wants it out of this range, and fast.

  3. #3
    voogru is offline
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    Quote Originally Posted by jimmy66 View Post
    So, as charming as Mr. Karmizan may be I seem to smell something rotten in denmark with this stock buy. On the wake of the other corporate scandals this could be the coup of all coups. Mr. Karmizan had 20 million dollars of sirius stock purchased 2 years ago purchased at 3.50 to 4 per share. so roughly 5 million shares. He is then restricted from buying for 2 years while this merger winds its way through the system and its shares take a beating. People are excited and the stock while low at 2.11 Mel still cant buy. Everyone is expecting a huge pop for share price as the merger closes and everyone will do well, except Mel. short term he would probably about break even. So how does he figure to cash in personally??
    Lets think about it, hmmm. I got it, we need to refinance some debt, so we will wait untill the merger has been approved and we will make a deal to lend equity at a huge discount and flood the market with these firesale priced shares. The loyal will scream and holler for mel or howard or sirius xm to make a big purchase. Buy 2 million shares way under real market value and lower my average share price by about a dollar or so in the process. Now as the share price rises to most analysts target mel will make another 5 to 7 million per dollar rise in price.

    genius and totally feasible if you ask me
    So if he didn't buy stock, he's leaving us out to dry.
    And if he buys stock, he's somehow doing something malicious to screw us.

    I guess he can't win?

  4. #4
    homer985 is offline
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    Quote Originally Posted by jimmy66 View Post
    genius and totally feasible if you ask me
    Disagree. Why? Let me point out Karmazin's purchases first...

    11/19/04 - 1,500,000 purchase @ $5.3589; cost $8,038,350
    01/12/06 - 1,000,000 purchase @ $6.2085; cost $6,208,500
    05/30/06 - 1,000,000 purchase @ $4.468; cost $4,468,000
    08/04/08 - 2,000,000 purchase @ $1.3732; cost $2,746,400
    Total purchases: 5,500,000 shares for $21,461,250; cost basis is $3.902


    Next, I want to point out his cash salary and bonuses...

    Mel Karmazin
    2004 Salary: $147,436 Bonus: $0.0
    2005 Salary: $1,250,000 Bonus: $2,200,000
    2006 Salary: $1,250,000 Bonus: $3,000,000
    2007 Salary: $1,250,000 Bonus: $4,000,000
    2008 Salary: $1,250,000 Bonus: $4,000,000 (projected)
    Total cash earnings: $18,347,436

    My point here is that Karmazin has taken home $18.3 million in cash payments (salary/bonuses) since starting at Sirius -- yet has bought $21.4 million worth of stock over the same period. So not only has he spent every dollar earned at Sirius on company stock -- he's also put in $3 million more of his own money.

    As of yesterday's close, he is down $13.4 million on his investments... that is HIS OWN money. What I'm trying to get at is that he has a lot riding on this company. I do not believe that Karamzin would do anything purposely that could hurt shareholders -- not with what he has on the line.

    But I suppose this is all beside the point to those that think he would purposely manipulate the pps. If this is what you think, then that is up to you -- however, you should know that there was no way that XM would have been able to get the buyers and terms that they got on the final bit of refinancing completed with the closing of the merger. I'm referring to the issuance of $550 million in 7% Exchangeable Notes due 2014. The buyers weren't there for the convertible notes -- hedge funds wont buy them without the guarantee of equity to use to short against the convertibles... which is becoming a common practice in this difficult debt market.

    Sirius didn't just issue this equity for no reason, or to drive their own stock price down -- they did it because they had no buyers for the debt. Would you have preferred that they defaulted on the debt?

    Sorry, I disagree.


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  5. #5
    clueless is offline
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    I am with homer on this one. I would add more but, I would just be reiterating what homer has already said.

  6. #6
    john is offline
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    homer also brings up the point that I have been saying since he came to SIRI. Which is he took a big pay cut to come to SIRI. He would have been up about 80 million if he would have just stayed a Viacom. He did not do that unless he thought there was something at SIRI. Also once again I wish people would just get off his back. The man has made more of sacrifice then any of the shareholders here.

  7. #7
    jimmy66 is offline
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    so, just read on Motley Fool that they feel somewhat the same way as i do. They do not say maybe manipulation of the stock was at play but they do say his buying yesterday was nothing more than reducing his average pps.

  8. #8
    deewcom is offline
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    Motley Fool's motivations are more spurious than Mel's. Motley Fool is a Cramer "The Street" wannabe outfit. They endeavor to move stock prices up or down the same way Cramer does. SIRI is Mel's project and he wants it to succeed. No question that Mel screwed the retail shareholders hard in the short term. Did what he had to do, blah blah. Still very painful. When SIRI gets some free programming going, lots more boxes will sell. When SIRI gets a la carte going, more subs will sell. When SIRI gets interoperable radios going more boxes and more subs will sell. SIRI could become bigger than all of AM and FM Radio.

  9. #9
    zcurzan is offline
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    Mel's been wrong before via Motley Fool

    Insider buying is typically an encouraging sign. If a CEO is willing to fork over real money for real shares, it's seen as a show of confidence. Unfortunately for Karmazin, yesterday's move is actually him just averaging down in his position.

    See, Karmazin snapped up 1.5 million shares of Sirius -- at $5.36 apiece -- shortly after he was brought on as CEO in 2004. Two years later, he nibbled at another million shares when the stock was at $6.20. He actually spent more than twice as much in each of those transactions than he invested in Sirius this week. Perhaps more importantly, it shows that Karmazin may be a brilliant radio guy, but he's no Wall Street Nostradamus.
    They say that a buy from management is typically a positive sign as they feel that the stock is undervalued at the time of their purchase. Then they go on to explain that because Mel already has a position, this buy is simply an attempt to average down his cost basis.

    IMO whether he is buying his first share, or buying at more expensive / cheaper levels that previously. A buy is a buy. It is a vote of confidence in the performance of the stock going forward from where it is. Now certainly it would look better if he was buying at more expensive levels than previously, but you take what you can get.

    I guess the point they are trying to make is that Mel has bought in the past, and it has gone down consistenly therefore don't count on him being some predictor of a booming stock price shortly.

    But I think everyone with a calculator will agree with you on the fact that he was averaging down his cost basis. To me it just means he thinks the stock is attractive at these levels. Regardless of how's he's called it in the past. He's in the same boat of many of us: if you liked the stock at $3, you gotta love it at $1.50

  10. Ad Fairy Senior Member

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