(Yicai Global) July 12 — BYD’s shares fell amid speculation that major backer Warren Buffett may be selling his stake in the Chinese electric car and battery giant. The firm told Yicai Global that it has not seen any information about shareholders cutting their positions, but market participants believe Buffett may be dumping his.
BYD [SHE: 002594] closed down 4.7 percent today at CNY309 (USD45.90), after earlier plunging as much as 7.5 percent. The firm’s Hong Kong-listed stock [HKG: 1211] slumped almost 12 percent to HKD270.20 (USD34.40).
The 225 million BYD shares that appeared in the Hong Kong Stock Exchange’s clearing system on July 11, per bourse data, triggered speculation that they came from Berkshire Hathaway, Buffett’s investment platform. In 2008, he invested USD230 million (HKD1.8 billion) to subscribe to the same number of Hong Kong shares of BYD.
Buffett has likely entrusted Citibank to sell the shares to multiple buyers, a Hong Kong investment banker told Yicai Global.
But a source at BYD’s investor relations department told Yicai Global: “We’ve checked the relevant information, but haven’t seen any shareholders reduce their holdings. Shareholders with a 5 percent or larger stake need to declare relevant rights and interests before cutting their holdings.”
According to Hong Kong bourse rules, major shareholders of listed firms with at least 5 percent of the stock are required to declare within three trading days when they pare or boost their holdings by a certain amount.
Cashing In on Gains
Market participants were bullish on new energy stocks in late June, noted Hu Yu, chief economist at Xinding Fund Management. Buffett often sells to pocket fat profits when the market rises sharply, he added, giving a possible reason for the stake sale.
Berkshire Hathaway owns 7.73 percent of BYD’s Hong Kong shares, the value of which has soared 37 times to about HKD69 billion (USD8.8 billion) based on BYD’s closing price of HKD306.80 on July 11.
The market penetration rate of electric vehicles may be close to 30 percent in China, and as high as 50 percent in some cities, which is several times that of the United States, Lin Jiayi, chief executive of Xuanjia Financial, told Yicai Global. EV makers are not likely to increase their profits, given predictable consumption capacity.
BYD had a net profit of about CNY3 billion (USD446 million) last year, much lower than the CNY3.8 billion reported in 2009, according to its financial data. The carmaker had earnings per share of CNY1.77 (26 US cents) in 2009, versus only CNY1.06 (16 US cents) in 2021.
In fact, there have been signs of shareholders cutting their stakes in BYD. Its executives and major investors significantly reduced their holdings last year. Director Xia Zuoquan cut his interest by 12 million shares, accounting for up to 0.42 percent of BYD’s total shares. His was the biggest stake reduction last year.
Editor: Peter Thomas