VeriSign Inc. (NASDAQ: VRSN) has had two key things going for it of late. Its directory listing dominance of the .com and other domain extensions has been a dominant part of its business. It has also been at the forefront of Internet security. Now a third issue has arisen — Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) have increased their VeriSign stake yet again.
An SEC filing from the weekend showed that Buffett, Berkshire Hathaway and its entities now control some 12,985,000 shares of common stock. This represents a 10.4% stake of the outstanding shares of VeriSign.
What will be interesting to see is whether the 10% stake threshold matters to Buffett and his portfolio managers. That threshold requires extra filings and disclosures per SEC rules.
The real consideration is that VeriSign has a market value of $6.7 billion. That put the 10.4% stake worth almost $700 million, while Berkshire Hathaway’s market value is now more than $300 billion. And the entire public equity holdings of Berkshire Hathaway were worth north of $100 billion.
As we saw in prior quarters, this stake has been rising gradually through time:
- As of March 31, 2014, it was 11,685,654 shares.
- As of December 31, 2013, it was 10.96 million shares.
- As of June 30, 2013, it was 10.897 million shares.
- And as of March 31, 2013, it was 8.174 million shares.
Whatever Berkshire Hathaway’s ambitions are here, even acquiring VeriSign outright (something we would view as highly unlikely) would just not be a large enough of a holding to move the needle for Berkshire Hathaway earnings from period to period.
There is a reason that Buffett only looks for big mergers. They can move the needle.
VeriSign shares were up 1% at $53.75 shortly after the opening bell on Monday. Its 52-week trading range is $46.45 to $62.96, and the consensus price target from Thomson Reuters is $56.00.
A separate Form 3 filing from the weekend showed the breakdown as follows:
1. 7,937,736 of the total reported securities are owned by the following subsidiaries of Berkshire Hathaway Inc. (“Berkshire”): Government Employees Insurance Company (3,893,300), GEICO Casualty Company (3,170,336), GEICO Indemnity Company (74,500), GEICO Advantage Insurance Company (269,000), GEICO Choice Insurance Company (268,700) and GEICO Secure Insurance Company (261,900). As Berkshire is in the chain of ownership of these subsidiaries, it may be deemed presently to both beneficially own and have a pecuniary interest in all shares of Common Stock presently owned by each subsidiary. Warren E. Buffett, as the controlling stockholder of Berkshire, may be deemed presently to beneficially own, but only to the extent he has a pecuniary interest in, the shares of Common Stock presently owned by each such subsidiary. Mr. Buffett disclaims beneficial ownership of the reported securities except to the extent of his pecuniary interest therein.
2. 5,047,264 of the total reported securities are owned by the following pension plans of Berkshire’s subsidiaries: ACME Brick Company Pension Trust (115,363), The Buffalo News Mechanical Pension Plan (38,600), The Buffalo News Editorial Pension Plan (98,532), Dexter Pension Plan (101,169), Johns Manville Corporation Master Pension Trust (98,500), Scott Fetzer Company Collective Investment Trust (95,100), BNSF Master Retirement Trust (3,800,000) and Lubrizol Corp Master Trust Pension (700,000). Each of Berkshire, Mr. Buffett and these pension plans disclaims beneficial ownership in such shares.