Warren Buffett's Berkshire buys top entertainment stock

Rob Lenihan

Mon, Oct 14, 2024, 4:47 PM5 min read

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Sirius XM Holdings' (SIRI) stock recently did something rather unusual.

It went up.

Shares of the satellite and online radio company were up 8.7% to $27.10 at last check on Oct. 14, which will come as good news to investors who are have grown weary of the stock's propensity to slip.

Sirius XM shares are down 51% year-to-date and off nearly 44% from a year ago.

Why the switch from red to green?

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Perhaps the answer lies way out west to the Cornhusker State, Nebraska, and to one particular individual who goes by the name of Warren Buffett, aka the Oracle of Omaha.

The investment firm Buffett helms, Berkshire Hathaway (BRK.A) , continued to increase its stake in the New York media company, which now stands at 32%.

The company purchased roughly 3.6 million shares for about $87 million in separate transactions, according to a filing with the Securities and Exchange Commission.

Sirius XM was formed by the 2008 merger of Sirius Satellite Radio and XM Satellite Radio.

Warren Buffett's Berkshire Hathaway has amassed a position in SiriusXM.<p>Daniel Zuchnik/Getty Images</p> — Warren Buffett's Berkshire Hathaway has amassed a position in SiriusXM.
Daniel Zuchnik/Getty Images

Sirius XM CEO launches a new strategy

The company was on the ropes financially only months into the merger, but it was able to avoid declaring bankruptcy with the assistance of a $530 million loan from Liberty Media.

By 2023, Liberty Media had become SiriusXM's majority owner with an 83% stake, which it held through the Liberty SiriusXM Group tracking stock. Last year, Liberty proposed to spin off LSXM and combine it with SiriusXM.

Berkshire Hathaway increased its stake after billionaire John Malone’s Liberty Media completed the deal to combine its tracking stock with the rest of the audio entertainment company.

It was part of Malone’s reshuffling of his media empire that also included a splitoff of the Atlanta Braves baseball team into a separate publicly traded company, in which Berkshire also owns shares, CNBC reported.

When Liberty SiriusXM stock was converted to SiriusXM stock, holders received 0.8375 share of Sirius XM for each share of Liberty Sirius XM stock they held.

On Sept. 10, Sirius XM holdings said that it had kicked off a new chapter as an independent public company after closing its transaction with Liberty Media.

“Today SiriusXM embarks on a new phase in our journey as an independent public company, building on our leading position in audio entertainment,” Chief Executive Jennifer Witz said in a statement.

In August, Sirius said that it had lost 100,000 self-pay subscribers in its satellite radio unit in the second quarter, down from the 130,000 drop recorded a year ago.

"The progress during the second quarter was primarily due to a reduction in voluntary churn," Chief Financial Officer Tom Barry told analysts during the company's earnings call. "Paid promotional subscribers during the quarter decreased by 73,000 as some automakers shifted from paid promotional subscriptions to unpaid."

In the second quarter of 2023, the company had added 171,000. Revenue fell 3% from a year ago to $2.18 billion.

“Our primary objectives are to continue to invest in our Subscription business through enhanced consumer experiences, expand advertising opportunities, and deliver healthy margins and robust cash flow,” Barry said.

“We are committed to delivering our financial guidance and executing our strategic plan with precision and discipline," he said.

Sirius XM is scheduled to report results on Oct. 31.

Veteran trader: Sirius XM podcast deal 'move of desperation'

TheStreet Pro's Ed Ponsi shared his thoughts about SiriusXM is his Oct. 11 column.

Ponsi reminded readers that SiriusXM will be acquiring one of Spotify's (SPOT) most popular podcasts, "Call Her Daddy."

The sex and dating podcast, which is hosted by Alex Cooper, will move to SiriusXM after signing a three-year deal reportedly valued at $125 million.

Ponsi said the acquisition “seems like a move of desperation for SiriusXM.”

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"On July 9, we warned investors to avoid this stock. In the three months since then, SiriusXM has fallen by 29%," he said.

Meanwhile, shares of Spotify, the world's most popular streaming platform, have doubled this year and more than tripled (up 227%) over the past five years.

For the "Call Her Daddy" deal to pay off, Ponsi said, SiriusXM needs to keep the spotlight trained on Cooper.

"Satellite radio’s stars, like Howard Stern, have a tendency to disappear once they are behind the SiriusXM paywall," he said. "Instead of locking her away, the goal for SiriusXM should be to maintain and increase Cooper’s relevance and popularity."

"Call Her Daddy" made headlines recently when Vice President and Democratic Party presidential candidate Kamala Harris appeared on the podcast. Stern also interviewed Harris on his program.

Earlier this year, Sirius XM acquired the "SmartLess" podcast, which features Jason Bateman, Sean Hayes and Will Arnett, for around $100 million in a three-year deal.

Last week, JP Morgan reinstated coverage of Sirius XM with an underweight rating and $20 price target following a period of restriction, according to The Fly.

The firm said that it views the recently closed acquisition of Liberty Sirius favorably due to improved trading dynamics, potential index inclusion long term, and the 12% share count reduction "despite the uptick in leverage and commensurate impact on buybacks."

However, JP Morgan said that it still struggles with Sirius XM's long-term growth algorithm given uncertainty around sustainable long-term self-pay subscriber growth as well as app benefits.