It is always interesting to see how pension and employee 401K assets are doing when they have heavy stock weightings, and the SIRIUS Satellite Radio Holdings Inc. This is not an actionable event for investors betting on the SIRIUS-XM merger today, but this issue can come front and center as an employee and morale issue that could drive the company’s workforce elsewhere in the long-term if it doesn’t change.  (SIRI-NASDAQ) audited annual reports have been approved by auditors in the 11-K.

                                                                  ($000)
                                                           AS OF DEC 31,
Investments, at fair value:         2006               2005
Pooled Separate Funds          $18,118        $12,403
Sirius common stock                10,940          15,608
Participant loans                        221                225
Total investments                      29,279           28,236
Contributions receivable:
Employer                                      4,309             3,356
Participant                                    146                   —
Total contributions receivable  4,455              3,356

Net benefits                                 $33,734         $31,592

If you look at the SIRIUS common stock, the employees reviewing their 401K statements are probably feeling pretty unhappy.  The above figures are as of December 31, and at that day SIRIUS common stock closed at $3.54.  Then in a couple of weeks shares had gone as high as $4.00+, but today those sit at $3.02 on the close and have been as low as $2.66.  Unfortunately that drop is as the merger is still an IF rather than a WHEN, and there is a good chance those shares will be worth far less if the government blocks the merger. 

The good news is that the net assets still managed a small gain for the entire year because of the other retirement funds.  But investors that are in 401K contribution plans, particularly if they are growth investors, do not always see positive annual returns from the market.  Unfortunately, a 401K plan that is overly tied to the company stock can be a bad thing.  In the past this made workers rich as their tech stocks grew exponentially, but after witnessing Enron we saw what can happen when employee pension/401K monies are too tied up into the same stock as the employer.  If employees there are worried about the merger approval and think there is a real shot that the XM Satellite Radio deal won’t be approved, then they better think long and hard about having that much of the plan being tied to SIRIUS shares. 

Furthermore, what signal will it send to the investment community if all of a sudden one day an SEC filing is made showing a few million SIRI shares being sold by the employee 401K plan?  Probably not a very good one.

Jon C. Ogg
June 28, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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