Buffett makes a big bet on Liberty Media, bullish on satellite radio services.
Recently, Berkshire Hathaway significantly increased its stake in Liberty SiriusXM (LSXMA) by investing $3.68 billion through a series of transactions, raising its ownership to about 30%.
Documents filed with the U.S. SEC on March 28th show that this week, Berkshire Hathaway bought 8.9 million shares of Liberty SiriusXM Class C stock for $29 million, and purchased 3.8 million shares of Class A stock for $110 million. Class A shares have voting rights, while Class C shares do not.
Liberty Media is essentially a tracking stock of SiriusXM, a satellite radio company controlled by American media tycoon John Malone, holding about 80% of SiriusXM's shares.
However, Berkshire's aggressive buying contrasts with the bearish sentiment in the market, as SiriusXM has been heavily shorted this year, with a decline of up to 29%.
SiriusXM is an audio entertainment company that provides music, sports, comedy, talk shows, news, and other channels through subscription-based services. In recent years, the company has attracted significant attention due to market skepticism about its future, which in turn has fueled a lot of short interest in the stock.
Currently, short interest in SiriusXM accounts for 27% of its outstanding shares, a significant proportion, especially considering SIRI's market capitalization of up to $18.4 billion.
Recently, due to arbitrage traders putting selling pressure on the stock in anticipation of a merger between the company and Liberty SiriusXM Group, short interest in SiriusXM has increased. This arbitrage trading has led to an increase in long positions in LSXMA and short positions in SIRI, exacerbating the volatility of SIRI's stock price.
Analysis indicates that Berkshire's contrarian move, making a large bet on SiriusXM, sends three signals: bullish on the long-term growth of satellite radio; recognizing the merger value of Liberty Media and SiriusXM; and intending to exert influence at a critical moment to facilitate a smooth merger.
Berkshire clearly believes that its long-term value is underestimated, as SiriusXM holds a dominant position in the U.S. automotive market, with most new cars equipped with SiriusXM systems. As autonomous driving and in-car entertainment demand grow, this advantage will become more prominent.
Another factor is that Liberty SiriusXM has announced a merger with SiriusXM. This move aims to simplify the corporate structures of both parties, eliminate valuation discounts, and leverage economies of scale for synergistic growth
Once the merger is completed, Berkshire Hathaway will become the primary beneficiary of the combined entity, which is also a major factor driving the company's current significant increase in holdings.
Furthermore, through substantial purchases, Berkshire Hathaway can further solidify its investments and help facilitate a smooth completion of the merger.
In addition, Berkshire Hathaway's 13-F filing shows the sale of $2.4 billion worth of HP Inc shares and $1.93 billion worth of Apple shares.
Some of Berkshire Hathaway's recent purchases have also attracted market attention, especially its significant investments in oil. The company acquired $2.3 billion worth of Chevron stock and additionally purchased $1.17 billion worth of Occidental Petroleum Corporation

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Buffett is optimistic about the prospects of satellite broadcasting services, as well as the value release brought by merging with independent media

Market aggressively shorting, Berkshire fiercely increasing its holdings, what does Buffett value in this company?