Talk about two guys who should have known better. Yesterday, the SEC settled with two executives accused of insider trading at Sirius Satellite Radio
Easy money. Until you get caught.
I am not going to justify such actions. However, I do want to shed some light on what we're talking about here, and the way the future can shade our perceptions of the past. Sirius shares closed at $3.35 a stub on Oct. 5, 2004. The next morning, Stern announced the deal on the air. Starting in 2006, Stern would be moving his radio show exclusively to Sirius in a five-year, $500 million deal.
Yes, the stock traded as high as $4.29 before closing at $3.87 that day. However, four trading days after the deal was revealed, Sirius shares closed at $3.52, not much higher than where they were before the Stern news came public.
These two guys were up to no good, but let's not assume that paying Stern $100 million a year would have been seen by the market as a can't-miss slam dunk for Sirius. After all, by most accounts, XM Satellite Radio
The day the deal was announced, Seth Jayson wondered whether Stern really was worth $1 billion, because that was the amount of the market cap spike that day. Well, now, more than 14 months later, that $1 billion spike has become a $5 billion spike.
It leads one to wonder where the lines should be drawn. Would an Apple Computer
The SEC has every right to dig into these matters and dispense judgment. I realize that these two guys reportedly bought under questionable circumstances, with privileged information, and then flipped the shares days and weeks later. Not cool. Then again, maybe we should look into the folks who bought those shares, because the fireworks really didn't kick in until former Viacom
Satellite radio is going to be a major growth industry over the next few decades. XM or Sirius may not seem cheap at the moment, but that hasn't stopped our Rule Breakers newsletter service from picking up attractive companies at less-than-ideal valuations. In fact, two months ago, the newsletter recommended the purchase of XM Satellite Radio, with some praise going Sirius' way to boot.
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Longtime Fool contributor Rick Munarriz has been a satellite radio subscriber since 2004. However, he does not own shares in any of the companies mentioned in this story. He is a member of the Rule Breakers analytical team, seeking out tomorrow's great growth stocks today.