Warren Buffett has invested heavily in fossil fuel companies this year as skyrocketing commodity prices boosted profits for the sector. His investment firm, Berkshire Hathaway, recently purchased a $26 billion stake in oil and gas giant Chevron Corp. and a $13 billion stake in Occidental Petroleum, a Texas oil company. But that doesn’t necessarily mean the 91-year-old investor is turning away from clean energy, like some believe.
Fueling this belief, aside from the oil company investments, is a rumor circulating in the financial community this week that Buffett might have unloaded his entire stake in BYD, the Chinese automaker that recently unseated Tesla as the world’s largest electric vehicle seller.
On July 11, data from the Hong Kong Stock Exchange’s Central Clearing and Settlement System showed a transfer of about 225 million BYD shares from an unnamed account to Citibank. The transaction precisely matched the number of BYD shares held by Berkshire, sparking speculation that the seller might be Buffett.
Investors acted on this unverified information and dumped BYD stock on July 12, causing its share price to tumble more than 10 percent. But rather than Buffett unloading his shares, it was likely a misinterpretation of Hong Kong’s trading rules, according to a broker interviewed by Yicai, a Chinese financial newspaper, on July 13.
A misunderstanding of the Hong Kong Stock Exchange rules
A recent change in the Hong Kong Stock Exchange’s rules requires physical shares to be replaced by electronic ones, and this transition needs to go through brokerage channels such as Citi, which has an account in the stock exchange’s clearing and settlement system, said an unnamed analyst with Northeast Securities, a brokerage firm based in mainland China, Yicai reported. The analyst added his firm had been in contact with Berkshire and it wasn’t aware of any plans to reduce BYD holdings.
Berkshire owns 7.7 percent of BYD. Under Hong Kong’s securities law, shareholders with a stake larger than 5 percent in a company are required to disclose transactions. There is no filing yet showing Berkshire has sold any BYD shares. The firm will disclose exactly how many shares it owns in its second-quarter earnings report, expected to be released in August.
BYD’s share price rebounded nearly 7 percent on July 14 after the company raised its profit outlook for the first half of 2022 and rumors about Buffett’s exit fizzled.
Buffett is not known for investing in trendy sectors like electric vehicles or renewable energy. BYD is the only electric vehicle maker in Berkshire’s portfolio and the firm didn’t invest because of its EV business—Berkshire bought all of its BYD shares in 2008, when the company only made gas cars.
However, Buffett has increased his investments in clean energy, mostly wind, in recent years. Through its energy subsidiary, MidAmerican Energy, Berkshire has invested $13.6 billion in wind production since 2004, with plans for another $3.9 billion investment in wind and solar projects by 2025, the company said in its annual report in 2021.
