Berkshire Hathaway’s Recent Purchase of Liberty SiriusXM Tracking Stock

Berkshire Hathaway recently made a significant move by acquiring 2.8 million shares of the Liberty SiriusXM tracking stock. This strategic move reflects Berkshire’s intention to take advantage of the appealing discount offered by Liberty Sirius in comparison to the value of its stake in Sirius XM Holdings, the renowned satellite radio company.

The purchase of the tracking stock took place from January 2nd to January 4th, amounting to approximately $82 million. This information was disclosed in a Form 4 filing with the Securities and Exchange Commission on Thursday.

As a result of this recent acquisition, Berkshire now holds a substantial amount of 66.2 million shares of the tracking stock. Based on Thursday’s closing price, this stake is valued at an impressive $2 billion, constituting roughly 20% of the total tracker shares.

It is worth noting that Berkshire’s purchase included both the voting and nonvoting tracking stock. The company bought 1.1 million shares of Liberty SiriusXM class A voting stock (LSXMA), bringing their total holdings to 21.3 million shares of class A stock. Additionally, Berkshire acquired 1.7 million shares of Liberty SiriusXM nonvoting class C stock (LSXMK), resulting in a total ownership of 44.9 million shares.

On Thursday, the class A stock closed at $29.91, reflecting a marginal increase of 0.3%, while the nonvoting class C stock saw a rise of 0.5% to reach $29.93. In contrast, Sirius XM stock experienced a slight decline of 0.2% to finish at $5.43.

It is worth noting that the Liberty SiriusXM tracking stock is issued by Liberty Media, a company under the esteemed leadership of media mogul John Malone.

Interestingly, there are speculations among Berkshire watchers suggesting that the management of the Liberty Sirius XM investment falls under Ted Weschler, rather than CEO Warren Buffett. Weschler and Todd Combs oversee approximately 10% of Berkshire’s extensive $350 billion equity portfolio, while Buffett handles the remaining 90%. It is believed that Weschler enjoys a favorable relationship with Greg Maffei, CEO of Liberty Media.

In conclusion, Berkshire Hathaway’s recent purchase of the Liberty SiriusXM tracking stock demonstrates their keen strategic acumen and ability to spot valuable opportunities in the market. This move highlights their commitment to maximizing returns for their shareholders while maintaining a strong and diverse investment portfolio.

Liberty Media and Sirius Announce Merger Deal

Liberty Media and Sirius announced in December a merger deal that will combine the tracking stock with Sirius XM Holdings, creating a simplified structure. The agreement is expected to be a tax-free exchange, with the tracking-stock shareholders receiving Sirius XM Holdings stock.

Benefits for Shareholders

Both companies assure that this deal will be beneficial for both sets of shareholders, streamlining the structure of Sirius XM Holdings. Currently, Liberty holds approximately an 82% stake in Sirius XM Holdings through the tracking stock.

Potential Accumulation of Tracking Stock

Market investors are closely observing whether this deal could mark the start of a larger accumulation of the tracking stock by Berkshire. The appeal of the Liberty SiriusXM tracker lies in its trading value, which is about 35% lower than the value of Liberty’s SiriusXM stake. Experts believe that this gap might close as the transaction approaches. The closing of this deal is expected to take place in the third quarter.

Wide Gap and Future Possibilities

Currently, the wide spread between the trading values of the tracking stock and Sirius XM is mainly due to a low float in Sirius XM stock and the difficulty in short selling it. This situation makes it challenging for arbitragers to buy the tracking stock while simultaneously shorting Sirius XM. However, some experts argue that Sirius XM stock is currently overvalued and predict a possible sharp decline in its price once the Liberty transaction concludes.

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