ARTISTdirect PROVES VALUE OF OWN STOCK BY BUYING IT

Troubled online music company ARTISTdirect said in a regulatory filing last week that it plans to buy back approximately 7.5 million shares of its common stock and unexercised stock options because it failed to comply with federal and state securities law.

ARTISTdirect said it was offering to repurchase 585,724 common stock shares at prices ranging from $1.24 to $4 per share, according to documents filed Wednesday (11/22) with the Securities and Exchange Commission. The company will also repurchase 7 million stock options.

The company will use cash on hand to fund the buy back. As of Sept. 30, ARTISTdirect had $97 million in cash and short-term investments.

The stock in question is the one that ARTISTdirect offered to employees in addition to recording artists and their managers from August 1988 through March of this year, the company said.

In Wednesday's SEC filing, ARTISTdirect said it failed to comply with regulatory requirements because it didn't "register or qualify these stock and option issuances under either federal or California state securities laws" and warned it could incur contingent liability costs of about $9.6 million plus interest.

According to the SEC filing made when the company went public in March, ARTISTdirect's total number of issued shares "did not comply with the requirements of Rule 701 under the Securities Act, or any other available exemptions from the registration requirements of Section 5 of the Securities Act, and may not have qualified for any exemption from qualification under California securities law either." Whoa. They make boo-boo.

Shares of ARTISTdirect have fallen 93% since the company's March 28 IPO. The stock, which debuted at $12 a share, was down to 59 cents a share as of 11/27.