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TheStreet Open House

The 5 Dumbest Things on Wall Street: March 25

5. Stern Suits Up Against Sirius XM

Howard Stern in a spat with his employers!? Who would'a thunk it?

Actually, when it comes to Stern and his relationship with the suits, it's always a matter of when, not if, he'll turn on them -- something current employer Sirius XM (SIRI) may have forgotten.

If so, they got a reminder this week when Stern filed suit against his company for allegedly failing to pay stock awards it owed the shock jock in exchange for helping the satellite radio company surpass its subscriber growth target. At the end of December 2010, the company had 20.2 million total subscribers, the highest number of net subscribers in its history. Stern, naturally, believes he played a not-so-small part in making that happen.

One Twelve, Stern's production company, and his agent, Don Buchwald, claim Sirius didn't adhere to its five-year compensation agreement. According to the suit, Sirius gave Stern his initial bonus stock award of 34.4 million shares, then valued at $225.8 million, after he signed on in January 2006, but has failed to do so over the past four years. The self-professed "King of All Media" is claiming that he should have received a new stock award each year.

"Pursuant to our October 2004 agreement with Stern, we agreed to deliver these shares in December 2010, or earlier if as of the end of any fiscal year we exceeded agreed upon subscriber targets," Sirius said in a document filed with the Securities and Exchange Commission on Jan. 5, 2006.

How Stern and Sirius management were able to work out a new contract in December is particularly surprising, considering that Stern made it known this would be an issue. Last year, when Stern complained about not receiving his bonus, Sirius XM's general counsel Richard Basch told him and Buchwald that he did not give him the stock awards because the company did not count XM's subscribers toward the total number of Sirius subscribers. Gotta love that legal logic.

Poor Sirius investors thought their Stern nightmare was over after a new contract was ironed out before the end of the year with very little drama. Little did they know Sirius management seems to have decided to play a game of chicken with its most influential and vitriolic talent. Brilliant. When news of the suit surfaced on Wednesday, an analyst downgraded Sirius to a hold.

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