Mr. A.
In the middle of 2000. SIRI arranged a 150 Million Line of Credit with Lehman. The terms of this line of credit were disclosed.. The terms of the release of this LOC were tied to satisfactory performance reviews of the system in "operational mode" and some 1.050 million warrants to purchase SIRI stock in the $53 dollar range... The LOC expired at the end of Jan. 2001. Sometime in the latter part of last year. SIRI approached Lehman about "extending" the expiration date of the Lehman LOC past Jan. 30th.
Lehman agreed to extend the expiration date of this LOC, and SIRI management relayed this data to the shareholders at large. However, the did not disclose the terms of the new agreement until the Prospectus for the Secondary was released.. Some 3 months later..
Now, what they did not disclose to the shareholders was that in exchange for the "renegociated financing", SIRI now issued Lehman warrants for 2.1 million shares, with exercise prices in the upper 20's.. (525,000 of them vested immediately, even if without giving them the money).
Now 2.1 million shares equaled over 5% of the outstanding shares at the time.. However, management stated that they did not disclose this information because it was "NOT MATERIAL".
However, what it does show is the increased risk Lehman saw with the company.. Hence Lehman doubled the warrants to renegociate the agreement.
In addition. In a conference call a couple of weeks ago.. Management was asked how many orders they had from the OEM Car Manufactures.. Their answer was "NONE". Now, SIRI Management has always reported in their verbal and written language that these "alliances" with Ford, DaimlerChrysler, etc.. provided a "SECURE MARKET" for their services.
siriusradio.com
Follow the links to "INVEST" and then "CHARIMANS LETTER".
"During the past eighteen months, we have formed exclusive partnerships with Ford, DaimlerChrysler and BMW. These alliances enable us to access a large, secure market for our service, while reducing the need to market to individual consumers."
Now they disclose that this "Secure Market" is not so SECURE. And they will have to rely more heavily on the individual consumers!
In addition, in a Bloomberg audio interview.. The CEO was asked whether he should have "communicated" the terms of the extended LOC arrangements with Lehman more clearly at the time:
Here is the context of that conversation:
5:45 SECONDS INTO THE BROADCAST!
MODERATOR: Would you rather have communicated that process, at the time, more clearly than you actually did, in Retrospect.
CEO.Um! I suppose Uh! That one could Uh! look back... And with Uh! the Uh! Hindsight. of Uh! 20/20.Um!.. .and Say that, Uh! Um! , that, that, makes since, but at the a same time Uh!, Uh! ... it's a tough call..I mean, Ya know? It Really Is at this point! Uh!! We did not view it as a Material uh! Event in terms of it's Um! overall Materiallity Uh! to this companies CapEX, Op Ex, Prospects... Um!! Clearly, it is NOT!! Um! And so Um! I'm not sure we would have done anything differently.
Here is a link to the audio story.. I am not sure if it is still available..
messages.yahoo.com
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