Warren Buffett Ups Stake in SiriusXM by Over 250% In Q2 As Liberty Media Merger Nears Completion

Berkshire Hathaway chairman Warren Buffett increased his stake in US-based audio entertainment company Sirius XM Holdings (NASDAQ: SIRI) by 262.24% during the quarter ended June 30. According to the latest company 13F filing, Berkshire Hathaway purchased 96.2 million SIRI shares in Q2 at an average price of $3.36 apiece to own a total of 132.88 million shares worth over $376 million.

SIRI generates revenue from its subscription entertainment service, SiriusXM, and premium music streaming services platform, Pandora. With 33 million paid subscribers, SiriusXM offers listeners diverse content, including news, exclusive interviews and podcasts, live sports analysis and music, in-studio performances and original shows. Meanwhile, Pandora is SIRI's rapidly growing audio streaming service. It allows its 50 million active users to curate their stations and playlists. The company boasts a combined monthly audience of almost 150 million listeners.

Buffett's move comes ahead of Serius XM Holdings' planned merger with Liberty Media Corporation (NASDAQ: LSXMA) for a simplified ownership structure, better trading liquidity, and improved scope for inclusion in stock indexes. Liberty Media would merge its businesses with a majority stake in SiriusXM with the whole of the broadcasting giant. The deal, expected to be closed in Q3, will also merge the SiriusXM stock (SIRI) with Liberty Media's SiriusXM tracking stock group (NASDAQ: LSXM) to incorporate a new public company representing the SiriusXM brand. Investing in SIRI can be done by purchasing SIRI shares or the Liberty SiriusXM (LSXM) tracking stock, which makes up 84% of SiriusXM's 3.84 billion outstanding shares. The price of a tracking stock depends on the finances of a particular business segment, and shares are traded separately from the parent company stock.

Liberty Media has three tracking stock groups, one being the Liberty SiriusXM Group tracking stock. Buffett also holds a significant stake in Liberty Media's communications and entertainment businesses. Last quarter, he markedly reduced his stake in Liberty Media's Live Group (NASDAQ: LLYVA, LLYVK) tracking stock and increased his exposure to Liberty's SiriusXM group stock.

SIRI Slashes Overheads Significantly In Q2

While SIRI's Q2 revenue marginally dropped by 3% year-over-year (YoY) to $2.18 billion in Q2, net income increased to $316 million from $310 million in the prior year. The company's adjusted EBITDA increased by 8% quarter-over-quarter to $702 million as it considerably reduced acquisition costs, design and development overheads, and administrative expenses. The cost-trimming actions and lower cash tax payments achieved via SIRI's tax equity investment benefits also helped boost free cash flow by 6% YoY to $343 million. SIRI remains confident of reaching its $200 million cost-savings target for the full year 2024.

Last quarter, SIRI also shifted focus to offering innovative product enhancements for listeners. The company inaugurated a state-of-the-art studio in Las Vegas, launched new channels, and inked exclusive podcast monetization contracts to expand its robust podcast network. The focus remains on maximizing its unique live programming potential.

Management Focus On Returning Value To Investors

During the earnings release, SIRI CEO Jennifer Witz said that the company prioritizes its listeners and investors by using its resources to innovate and create new growth opportunities. "By pairing the unique voices and perspectives across music, sports, and politics from our unparalleled live programming with new features and subscription packages, we are poised to capitalize on the opportunities ahead," said Witz.

Meanwhile, SIRI CFO Tom Barry highlighted the company's commitment to offering long-term value to investors, as it returned $103 million to shareholders via quarterly dividends. SiriusXM expects to bring $8.75 billion in total revenues this year with a free cash flow of $1.20 billion. While the stock price has remained muted in recent years, the organizational restructuring is expected to improve SIRI's finances and streamline business operations.

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