Source: Sina Finance
Buffett's$Berkshire Hathaway-A (BRK.A.US)$/$Berkshire Hathaway-B (BRK.B.US)$Purchased 2.8 million Liberty SiriusXM tracking shares (tracking stock) in recent days, apparently to use Liberty SiriusXM versus its satellite broadcaster$Sirius XM (SIRI.US)$Profit from discounts on shares held.
Berkshire's Form 4 filing with the US Securities and Exchange Commission (SEC) on Thursday evening local time shows that the company purchased approximately $82 million worth of Liberty SiriusXM tracking shares between January 2 and January 4. Currently, it holds a total of about 66.2 million tracking shares, worth 2 billion US dollars based on Thursday's closing price, and the shareholding ratio is about 20%.
These tracking shares are issued by the Liberty Media Group controlled by American media mogul John Malone.
Some Berkshire observers believe that the investment in Liberty SiriusXM was managed by Ted Weschler (Ted Weschler) and not by Buffett's own decision. Wechler and Todd Combs (Todd Combs) manage about 10% of Berkshire's approximately $350 billion stock portfolio, and Buffett manages the other 90%. Wechler is believed to have a good relationship with Greg Maffei (Greg Maffei), CEO of Liberty Media.
Liberty Media and Sirius announced a deal in December last year to merge these tracking shares with Sirius XM Holdings. It is anticipated that this will be a tax-free transaction. Shareholders of these tracking shares will receive Sirius XM Holdings' shares.
The two companies said the deal would simplify SiriusXM Holdings' structure and benefit both shareholders.
Liberty Media currently holds approximately 82% of SiriusXM Holdings' shares through tracking shares.
Investors will be watching closely to see if this marks the beginning of Berkshire's larger holdings of Liberty SiriusXM tracking shares.
According to estimates, the appeal of Liberty SiriusXM tracking shares is that its transaction price is about 35% lower than the value of SiriusXM shares held by Liberty Media. The bulls are betting that the spread will narrow as the deal gets closer; the deal will end in the third quarter. Holders of these tracking stocks could profit if the gap narrows.
Currently, the spread is still very large, partly because SiriusXM shares have a small circulation volume and are difficult to short, making it difficult for arbitrators to buy tracking stocks and short sell SiriusXM.
Some people believe that SiriusXM's stock price is now overvalued, and once the Free Media deal is completed, its stock price will drop drastically.
editor/tolk