Why Warren Buffett's Paramount bet may have cost him $1.5 billion
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- Famed investor Warren Buffett's Berkshire Hathaway placed a $2.7 billion bet on Paramount in 2022.
- It hasn't worked, at all — Buffett just said he has sold all his stock and lost "quite a bit of money."
- Let's do some math to figure out what that means.
What's going to happen to Paramount, the once-mighty media conglomerate?
No one knows! Maybe the son of one of the world's richest men will buy it. Maybe Sony and Apollo, the big private equity company, will buy it. Maybe no one buys it, and it has to try to muddle through with an ungainly three-man leadership group running the place.
Anyway, Warren Buffett isn't sticking around to find out. The famed investor, who not very long ago owned 15% of Paramount, disclosed over the weekend that his Berkshire Hathaway holding company has sold its entire stake in the company this year.
"I was 100% responsible for the Paramount decision," Buffett told attendees at Berkshire Hathaway's annual shareholder meeting. "It was 100% my decision, and we've sold it all, and we lost quite a bit of money."
So how much is "quite a bit of money?"
Berkshire Hathaway hasn't disclosed the total amount (I've asked). But when someone who's worth an estimated $132 billion says "quite a bit of money," it's probably a very big amount. By my very rough estimates, it could be something in the $1.5 billion range.
The math: In 2022, Berkshire accumulated 91 million shares of Paramount B shares; Barron's estimates he paid "more than $30" per share. That's a $2.7 billion investment.
At the end of 2023, Berkshire announced it had sold off around 28 million of those shares during the last three months of the year. Per Bloomberg data, Paramount's average closing price during the quarter was $13.39. So, let's assume Berkshire was able to sell those shares for something in the $374 million range.
That left Berkshire with another 63.3 million Paramount shares at the beginning of 2024, and sometime between then and Saturday they have sold off the rest. Paramount's average during that timeframe was $12.38. That suggests Berkshire got another $784 million from those sales.
Add all that up, and it looks like Berkshire sold its Paramount stake for $1.2 billion after paying $2.7 billion for it — a $1.5 billion loss. Which does indeed seem like "quite a bit of money."