Some think that Sirius XM stock now is overvalued and that its price will fall sharply once the Liberty transaction closes.
Photograph by Robin Marchant/Getty Images for SiriusXM
Berkshire Hathaway
purchased 2.8 million shares of the
Liberty SiriusXM
tracking stock in recent days for about $85 million, according to a form 4 filing with the Securities and Exchange Commission late Wednesday.
This follows the purchase of 2.8 million shares of the tracking earlier in January.
Berkshire apparently is seeking to capitalize on the big discount of the tracking stock relative to the value of its holding in
Sirius XM Holdings,
the satellite radio company.
The most recent purchases came on Friday, Tuesday and Wednesday at a price of about $30 per share.
Berkshire now holds about 69 million shares of the tracking stock which is valued at $2.1 billion based on Wednesday’s closing price. Its stake in the tracker is about 20%.
Berkshire purchased both the voting and nonvoting tracking stock. It bought 1.2 million shares of
Liberty SiriusXM Holdings
class A voting stock (LSXMA) and now holds 22.5 million shares. It also purchased 1.6 million shares of the Liberty Sirius XM Holdings nonvoting class C stock (LSXMK) and now owns 46.5 million shares.
The Class A stock finished Wednesday at $30.59, up 0.3% while the nonvoting C stock gained 0.6% to also finish at $30.59.
The tracking stock was issued by
Liberty Media,
which is controlled by media mogul John Malone.
Some Berkshire followers believe the Liberty Sirius XM investment is managed by Ted Weschler, rather than CEO Warren Buffett.
Weschler and Todd Combs run about 10% of Berkshire’s roughly $350 billion equity portfolio with Buffett managing the other 90%. Weschler is believed to have a good relationship with Liberty Media CEO Greg Maffei.
Liberty Media and Sirius reached a deal in December that will combine the tracking stock with Sirius XM Holdings in what Liberty expects to be a tax-free exchange in which the tracking stock shareholders will get Sirius XM Holdings stock.
Liberty now holds about 82% of Sirius XM Holdings through the tracking stock.
The appeal of the Liberty SiriusXM tracker is that it trades at about a 33% discount to the value of Liberty’s SiriusXM stake, Barron’s estimates.
Bulls are betting that the gap closes as the transaction approaches – it is due to close in the third quarter. If the gap closes, holders of the tracking stock could score some big gains.
The recent Berkshire purchases indicate that the company may continue to expand its stake in the tracking stock.
The spread remains wide in part due to a thin float in Sirius XM stock and difficulty in shorting it, making it tough for arbitragers to buy the tracking stock and sell short Sirius XM, whose shares ended Wednesday at $5.26, up 1.7%
Some think that Sirius XM stock now is overvalued and that its price will fall sharply once the Liberty transaction closes.
Write to Andrew Bary at andrew.bary@barrons.com
