Warren Buffett-backed BYD latest Chinese green energy stock to take a hit as valuation, insider selling concerns build up
- The sell-off in BYD shares wiped out HK$77.5 billion from its market capitalisation that exceeded HK$1 trillion in June
- Investors however remain bullish and expect BYD’s shares to rise 24 per cent to HK$365.45 in the next 12 months
BYD, the Chinese electric-vehicle maker backed by Warren Buffett, is taking some of the zing out of the red-hot renewable energy sector. Investors are concerned that some bets in the green energy segment have become crowded, while others say that price gains are unsustainable.
The Shenzhen-based carmaker slumped 8.5 per cent for the week ended July 15 in Hong Kong, posting the biggest decline for the five-day period since the end of March. The sell-off wiped out HK$77.5 billion (US$9.9 billion) from BYD’s market capitalisation that exceeded HK$1 trillion last month.
One direct trigger for the sudden sell-off was due to speculation that Buffett’s Berkshire Hathaway was selling its stake in the Chinese company, which has been kept unchanged since the investment was made in 2008. Berkshire Hathaway holds 225 million shares, or a 7.7 per cent stake, in BYD through its unit Western Capital Group, company filings show. The same number of shares has shown up in Hong Kong exchange’s Central Clearing and Settlement System, which some investors see as a precursor to insider selling.
Omaha-based Berkshire did not immediately respond to an email sent by the Post seeking comment and an official from BYD’s investor relations department said the company had nothing to disclose for now.
A report from the Securities Times, a publication under the People’s Daily, last week cited an unidentified source from BYD saying that there was no stake-reduction information revealed to the Hong Kong exchange, the only official source for disclosing insider selling.
“We tend not to take such rumours seriously. For BYD and many other companies in the new energy auto supply chain, our main concern is the valuation,” Wang Qi, CEO of MegaTrust Investment in Hong Kong. “We do like new energy tech as a long-term investment theme. However, valuation discipline is also important to our investment process. There are other companies in the new energy auto industry that trade at a more reasonable valuation.”