After three days on the job at Sirius Satellite Radio, Howard Stern filed to sell all 34 million of his shares. Now, to be fair, just because he filed to sell doesn’t mean he IS going to sell. However, it looks awfully bad for Stern in a number of ways.
First, if Stern does sell, he is going to be suspected of a classic Pump and Dump. As Richard Suttemier said on TheStreet.com,
I wonder how many Stern fans are cursing him now for pulling the plug on his own shares? When he rang the opening bell at Nasdaq he said shares were worth $10 to $15.
TheStreet.com’s resident lunatic Jim Cramer added,
Am I an idiot, or did Howard Stern just do the greatest pump and dump in history? Did he not say that things were great and that Sirius (SIRI:Nasdaq) was doing well? Did he not just come on television, ring the opening buzzer or whatever they have at the Nazz and get all lathered about the stock? And now he’s free to sell 34 million shares? I mean, how many people went and bought the stock much higher because of what he just said, and now will feel compelled to “average down” when Stern does his selling?
Now, you could argue that Stern knew nothing and that he simply doesn’t matter. He can say what he wants because he is a big star. But last I looked, there was no Big Star immunity to the 1934 Act.
It’s not just the appearence of impropriety in selling his shares so soon after saying they were 50% undervalued. What does it say about his belief in the company’s long-term future? More important, what does it say about his respect for CEO Mel Karmazin, who signed him to his 5 year, $500M contract? Karmazin must be furious. Once news got out about Stern’s disclosure, Karmazin was forced to go into crisis mode, making a significant buy of stock which he described as a “statement buy” to demonstrate his confidence in the company. What a way to be treated by your biggest star in his first week on the job. Thanks Howard.
William Gabrielski, again, from TheStreet.com,
So, Sirius (SIRI:Nasdaq) CEO Mel Karmazin is doing damage control today with his 1-million share “statement buy.”
While it is true that a filing does not necessarily mean a sale is imminent, I don’t think Karmazin would have made his purchase today if he believed there wouldn’t be additional headline risk from the actual sale of Stern’s stock in the coming days and weeks.
Knowing what I know about Mel Karmazin from following Sirius and even taking him to task a bit in person, I would imagine he must be very embarrassed about Howard Stern’s decision to make a filing that states he can sell any and all of his shares whenever he wants. Karmazin has a lot of pride in “his company,” and Stern is making him look bad right now.
Stern says Sirius stock is 50-75% undervalued yet Morningstar says it is 300% overvalued,
Sirius Satellite Radio (NasdaqNM:SIRI – News)
Price/fair value ratio: 302%
From the Analyst Report: “With all of the substitutes to satellite radio available, each installed satellite radio unit will not translate into a self-paying subscriber. Not all consumers will want to spend $150 per year for satellite radio when terrestrial radio, still available through satellite radio hardware, costs nothing. In our opinion, digital music on MP3 players, wireless networks capable of streaming Internet radio into the car, and content through cell phones loom as potential threats, too.”
Maybe Howard Stern believes Morningstar more than he believes his own BS.
UPDATE: Seriously, Does the Sirius-Howard Stern Deal Make Sense?