Buffett increases stake in satellite radio company SiriusXM, raising ownership to 32%
Last week, Warren Buffett's Berkshire Hathaway company spent approximately $87 million in multiple transactions to purchase around 3.6 million shares of SiriusXM, increasing its stake to 32%. Despite facing challenges such as user attrition and limited growth potential, Berkshire may have identified a merger arbitrage opportunity, hence choosing to continue investing. The news of the increased holdings caused SiriusXM's stock price to surge over 9.3% during Monday's trading session
Berkshire Hathaway, owned by Warren Buffett, recently continued to increase its stake in satellite radio company SiriusXM, currently holding 32% of the company.
According to the filing submitted by Berkshire to the U.S. Securities and Exchange Commission, the company purchased approximately 3.6 million shares of SiriusXM through multiple transactions from last Wednesday to last Friday, with a total investment of around $87 million.
This increase occurred after Liberty Media completed a restructuring. Liberty Media, owned by billionaire John Malone, merged stocks related to SiriusXM in early September and spun off the Atlanta Braves baseball team into a separate publicly traded company. Berkshire also holds shares in the baseball team. This restructuring is part of Malone's adjustment to his media empire.
Berkshire first bought Liberty Media tracking stock in 2016 and began buying a large amount of SiriusXM tracking stock in early 2024. CNBC pointed out that Berkshire may be eyeing merger arbitrage opportunities, hence the decision to continue investing.
Despite Buffett being 94 years old this year, he has never publicly discussed this investment. It is currently unclear whether this decision was made by him personally or by his two investment managers, Ted Weschler and Todd Combs.
SiriusXM is currently facing user attrition and unfavorable demographic changes, leading to its lack of popularity on Wall Street. According to FactSet data, out of 14 analysts, only 5 have a "buy" rating on the stock. Morgan Stanley analyst Sebastiano Petti has a "hold" rating, expressing concerns about the company's long-term growth potential.
Furthermore, Liberty Media's restructuring resulted in a 12% reduction in SiriusXM's share count, potentially causing the company to suspend stock buybacks until 2027, which could put pressure on the stock price. Despite SiriusXM's stock price briefly rising over 9.3% after Berkshire's increase, the stock has still fallen by over 50% this year.
Berkshire's last major investment in a large media company was in 2022 when it bought Class B shares of Paramount Global. However, this investment quickly ran into trouble, with Buffett revealing in May this year that he had sold all the shares at a loss. Buffett stated that the failed investment in Paramount made him think more about what people value most in their leisure time. He pointed out that the streaming industry has many competitors all vying for audience consumption, leading to intense price wars.
