Contrary to earlier speculation, billionaire US-based investor Warren Buffett has discussed the possibility of raising his 10% stake in car and battery maker BYD, Chinese media reported on Wednesday, sending BYD’s shares up over 4%.
In the past week, analysts and investors had speculated that Buffett, who is making a closely watched tour of China with former Microsoft chairman Bill Gates, might instead sell down his stake after the automaker encountered problems, Reuters noted. That included sliding sales, delayed plans to export its electric cars and a legal dispute with the Chinese government over land it wants to develop.
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“We wouldn’t comment on what we are going to do,” Buffett said on the sidelines of an event in Beijing when asked about the prospect of increasing his BYD stake.
BYD shares rose by up to 4.4% in Hong Kong, outpacing the broader Hang Seng Index’s 1.3% rise.
China Business News cited BYD sources as saying Buffett had a private meeting on Tuesday night with BYD officials in which the possibility of increasing the 10% stake in BYD held by Buffett’s Berkshire Hathaway was the major topic. But it was unknown whether they had reached any conclusion, the report added.
“This is a good thing for BYD,” Phillip Securities (HK) analyst Zhang Jing told Reuters. “If (Buffett) raises his stake at the current high price levels, that would be a vote of confidence, for sure.”
Buffett and Gates were in Beijing on Wednesday to attend a BYD ceremony for the launch of the company’s first premium multipurpose vehicle (MPV).
The car, the M6, will allow the car maker to compete in the fast-growing premier MPV market, now dominated by General Motors and Honda Motor. BYD’s portfolio currently includes only sedans.
BYD shares have risen about 19% in the past two weeks following news of Buffett’s visit.
But the stock’s performance lags that of its main rivals, Reuters said. Earlier on Wednesday, Brilliance China – which has a local car assembly JV with BMW – hit a record of HK$5.52 on expectations of higher sales in coming months, Volvo owner Geely rose nearly 4% and Dongfeng Motor – which has JVs with several western automakers – surged almost 7%.
“The stock looks expensive but Coca-Cola also grew up from a small company,” added Zhang. BYD shares are trading at around 25 times 2010 projected earnings.
