Andrew Bary
Berkshire Hathaway's move to double down on its stake in Liberty Sirius XM Holdings this year hasn't panned out well as the tracking stock for satellite radio operator Sirius XM Holdings is down around 30%.
The tracking stock has come down because it is linked to Sirius XM, whose shares are off over 50%, making it the worst performer this year in the Nasdaq 100 index.
Berkshire came into 2023 with around 63 million shares of Liberty Sirius XM, and it has boosted that stake to 105 million shares, or about 32% of the tracker issued by John Malone's Liberty Media. Berkshire owns both the Liberty Sirius XM class A voting shares $(LSXMA)$ and the nonvoting stock $(LSXMK)$.
Liberty Sirius XM's A shares finished Thursday at $20.48, down 3.5% after hitting a new 52-week low in the session. Berkshire was a buyer near the 52-week high of $31. Sirius XM stock was off 3.6% to $2.54 Thursday after hitting a new 52-week low of $2.45.
Berkshire's most recent purchase occurred in late April. As a holder of more than 10%, Berkshire must disclose changes in its holdings within two business days.
Berkshire's stake in Liberty Sirius XM totals about $2.2 billion, making it a tiny component of Berkshire's equity portfolio of about $385 billion of which Apple accounts for over 40%, or about $169 billion.
The apparent lure for Berkshire was that Liberty Sirius XM came into 2024 trading at a big discount of around 35% to the value of the company's 84% stake in Sirius XM.
In December, Liberty Media and Sirius XM agreed to a long-awaited merger of the tracker and the satellite radio company that would result in the distribution of the Sirius XM stock held by Liberty to the tracker holders with each share receiving about 8.4 shares of Sirius XM. That deal offered a mechanism to close a wide discount that had persisted for several years.
The discount has narrowed to about 5% ahead of the closing of the deal, which is expected early in the third quarter. But with Sirius XM down so sharply, it has dragged down the tracking stock.
Sirius XM stock is down amid concerns about satellite radio subscriber losses, a decline in the stock price of cable companies like Charter Communications and contraction in the company's valuation, which had stood at a premium to cable companies at year-end 2023.
Sirius XM now is valued at about seven times projected 2024 earnings before interest, taxes and depreciation and amortization. The dividend yield is 4%.
The company's market capitalization is around $9 billion and it is expected to have about $10 billion of net debt after the Liberty merger -- the market cap is based on the expected postdeal share count of 3.4 billion.
Some Berkshire watchers say the Liberty Sirius XM position was likely accumulated by Berkshire investment manager Ted Weschler, who works with CEO Warren Buffett. Weschler and Todd Combs together run about 10% of the Berkshire equity portfolio. Weschler is believed to be close to Liberty Media CEO Greg Maffei.
Berkshire had no comment.
The Liberty Sirius XM trade also has attracted some big hedge funds including Baupost Group, Millennium Management and Point72. Seth Klarman heads Baupost, Steve Cohen runs Point 72 and Israel Englander is CEO of Millennium. These funds held stakes in the tracking stock on March 31, the latest reporting date.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 13, 2024 18:24 ET (22:24 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments