Berkshire Hathaway Inc (BRK.B)

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Berkshire Buys More Liberty Sirius XM, Now Owns $2.2 Billion of Tracking Stock
By: Barrons | March 7, 2024

Berkshire Hathaway purchased about 3.7 million shares of Liberty Sirius XM Holdings, the tracking stock for Sirius XM Holdings, in recent days, bringing its stake in the tracker to almost 76 million shares, according to filings late Wednesday.

Berkshire now holds $2.2 billion of Liberty Sirius XM Holdings, a roughly 23% stake in the company. Berkshire purchased both the voting Class A shares an d nonvoting Class C shares for a total of more than $100 million from Monday through Wednesday of this week. Sirius XM operates a satellite radio network with over 32 million paying subscribers.

This continues intermittent purchases of the tracking stock so far this year by Berkshire. The Liberty Sirius XM voting A stock ended Wednesday at $29.38, down 0.1% while the nonvoting C shares finished at $29.25, off 0.2%.

Berkshire appears to be looking to capitalize on the spread between the value of the Sirius XM stock that will be received by Liberty Sirius XM shareholders under a deal reached in late 2023 and the current price of the tracking stock.

Sirius XM ended Wednesday at $4.19, up 0.5%. Liberty Sirius XM holders are due to get 8.4 shares of New Sirius XM for each share of the tracking stock. That's worth about $35, allowing Sirius XM holders to make about 20% ($6 a share divided by the current tracker stock price). The deal is due to close in the third quarter. Current Sirius XM holders will get the new stock on a share-for-share basis.

The spread has narrowed so far in 2024 as Sirius XM stock has come down from a price of about $5.50 in late December. The spread could narrow further as the closing date approaches and after the transaction closes — assuming the deal occurs. Liberty Media owns over 80% of Sirius XM and that stock could start hitting the market once the deal closes.

Some investors have bought the tracking stock and shorted Sirius to capture the spread, but that can be difficult to do now given the thin float in Sirius, high short interest in the stock, and high borrowing costs to short it.

Some Berkshire watchers think the company's Liberty Sirius XM holding is overseen by Ted Weschler, one of two Berkshire investment managers who run about 10% of the roughly $350 billion equity portfolio. CEO Warren Buffett oversees the rest. Weschler is believed to be close to Liberty Media CEO Greg Maffei.

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