Berkshire Hathaway Expands Investment in Liberty SiriusXM Tracking Stock

by Warren Seah

Berkshire Hathaway recently made a strategic move by acquiring 2.8 million shares of the Liberty SiriusXM tracking stock. The company aims to take advantage of the discounted value of Liberty Sirius in relation to its stake in Sirius XM Holdings, a leading satellite radio company.

According to a Form 4 filing with the Securities and Exchange Commission, the purchases were made between January 2 and January 4, amounting to approximately $82 million. As a result, Berkshire now holds a substantial 66.2 million shares of the tracking stock, which is valued at $2 billion based on the latest closing price.

Berkshire Hathaway’s stake in the tracker stands at about 20%, making it a significant investment for the company. The acquisition includes both the voting and nonvoting tracking stock. Berkshire purchased 1.1 million shares of Liberty SiriusXM class A voting stock (ticker: LSXMA), bringing their total holdings to 21.3 million shares. Additionally, they acquired 1.7 million shares of the Liberty SiriusXM nonvoting class C stock (LSXMK), raising their ownership to 44.9 million shares.

As of Thursday, the class A stock closed at $29.91, reflecting a modest increase of 0.3%, while the nonvoting C stock saw a gain of 0.5% to reach $29.93. In contrast, Sirius XM stock ended the day at $5.43, marking a slight decline of 0.2%.

Liberty Media, controlled by media mogul John Malone, issued the tracking stock. Speculation suggests that Ted Weschler, one of Berkshire Hathaway’s investment managers, may be overseeing the Liberty Sirius XM investment instead of CEO Warren Buffett. Weschler and Todd Combs are responsible for approximately 10% of Berkshire’s impressive $350 billion equity portfolio, while Buffett manages the remaining 90%. It is believed that Weschler enjoys a positive working relationship with Liberty Media CEO Greg Maffei.

Liberty Media and Sirius Announce Deal to Combine Tracking Stock with Sirius XM Holdings

In December, Liberty Media and Sirius announced a deal that will merge the tracking stock with Sirius XM Holdings in a tax-free exchange. As part of the deal, shareholders of the tracking stock will receive Sirius XM Holdings stock.

This merger is expected to simplify the structure of Sirius XM Holdings and will bring benefits to both sets of shareholders.

Currently, Liberty holds approximately 82% stake in Sirius XM Holdings through the tracking stock.

Investors are keenly observing whether this signals the start of Berkshire’s increased accumulation of the tracking stock.

The Liberty SiriusXM tracker has lured investors due to its trading at a discount of about 35% to the value of Liberty’s SiriusXM stake. Analysts estimate that the gap may close as the transaction nears its completion in the third quarter. If this happens, holders of the tracking stock stand to gain.

The wide gap between the two stocks partly exists because there is a limited availability of Sirius XM stock, making it difficult for arbitragers to buy the tracking stock and sell short Sirius XM.

There are also some who speculate that the current valuation of Sirius XM stock is too high and predict a sharp decline once the Liberty transaction is finalized.

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