Berkshire Hathaway's Investment in Liberty SiriusXM Tracking Stock
Berkshire Hathaway purchases 2.8 million shares of Liberty SiriusXM tracking stock, taking advantage of a discount. The company now holds approximately 69 million shares, representing 20% ownership.
Troy D. Hanson
January 18, 2024
Berkshire Hathaway recently made a significant investment in the Liberty SiriusXM tracking stock, purchasing a total of 2.8 million shares for approximately $85 million. This comes after another purchase of the same number of shares earlier this year. Seeking to take advantage of the substantial discount on the tracking stock compared to its holding in Sirius XM Holdings, the satellite radio company, Berkshire Hathaway made these recent acquisitions at a price of around $30 per share.
As a result of these purchases, Berkshire Hathaway now holds approximately 69 million shares of the tracking stock, which has a valuation of $2.1 billion as of Wednesday’s closing price. This stake represents about 20% ownership in the tracker. Furthermore, Berkshire Hathaway acquired both the voting and nonvoting tracking stock. It purchased 1.2 million shares of Liberty SiriusXM Holdings class A voting stock (LSXMA), bringing its total holdings to 22.5 million shares. Additionally, the company bought 1.6 million shares of the Liberty Sirius XM Holdings nonvoting class C stock (LSXMK), increasing its ownership to 46.5 million shares.
During Wednesday's trading session, the class A stock closed at $30.59, reflecting a 0.3% increase, while the nonvoting class C stock gained 0.6% and also finished at $30.59.
It is important to note that the Liberty Sirius XM investment has spurred speculation among Berkshire followers that it is managed by Ted Weschler rather than CEO Warren Buffett. This investment belongs to Berkshire Hathaway, ensuring Berkshire's continued prowess in strategic investments.
Berkshire's Equity Portfolio
Weschler and Todd Combs, in collaboration with Warren Buffett, manage Berkshire Hathaway's equity portfolio. Weschler is known to have a good relationship with Liberty Media CEO, Greg Maffei.
The Liberty SiriusXM Tracker
In December, Liberty Media and Sirius reached an agreement to combine the tracking stock with Sirius XM Holdings. Liberty expects this merger to be a tax-free exchange, with the tracking stock shareholders receiving Sirius XM Holdings stock.
Currently, Liberty holds approximately 82% of Sirius XM Holdings through the tracking stock. One of the main attractions of the Liberty SiriusXM tracker is that it trades at a discounted price (around 33%) compared to the value of Liberty’s SiriusXM stake, as per estimates.
Potential Gains for Holders
Bullish investors are anticipating that the discount will narrow as the transaction approaches its closing date in the third quarter. If this happens, holders of the tracking stock could potentially experience significant gains.
The recent purchases made by Berkshire indicate the possibility of the company further increasing its stake in the tracking stock. However, the wide spread is partly due to a low level of float in Sirius XM stock. Additionally, it is challenging for arbitragers to buy the tracking stock while simultaneously shorting Sirius XM.
Uncertainty Surrounding Sirius XM Stock
There are some concerns among investors that Sirius XM stock may be overvalued at its current price. They believe that once the Liberty transaction is finalized, the stock price may sharply decline.