Risk & Compliance

SEC Launches Probe of XM Satellite

Documents requested by the SEC appear to mirror the concerns raised in a recent lawsuit. The suit charged that the company had failed to disclose t...
Stephen TaubSeptember 6, 2006

XM Satellite Radio Holdings Inc. said the Securities and Exchange Commission has launched an informal, inquiry into the company’s past financial disclosures.

The company said that on Aug. 31, the SEC requested documents regarding its subscriber targets, costs associated with attempting to reach those targets, and related matters during the third and fourth quarters of 2005.

XM added that the questions “appear to pertain” to matters similar to the issues raised in securities lawsuits filed against XM earlier this year.

The company said it will cooperate fully with the SEC’s probe.

Lawsuits filed earlier in the year alleged that the company “knew or recklessly disregarded and failed to disclose” that it was unable to attain its stated subscriber goal of six million subscribers at year-end, without increasing its costs to acquire new subscribers.

As a result of these expenditures, the company’s net losses were substantially increased, contrary to the declining subscriber acquisition costs and net losses touted by the company, according to the lawsuits.

In addition, a number of insiders were accused of selling “significant portions of their XM stock for millions of dollars” by taking advantage of “the artificial inflation of the company’s securities.”