Warren Buffett is a kingmaker in a lot of ways.
If one of his funds at Berkshire Hathaway (BRK.A) takes a stake in a
company, that company automatically gets an air of legitimacy.
Even well-established brands like Apple can get a reputational bump from a Berkshire investment.
Related: Warren Buffett, Berkshire Hathaway sell banks to buy booze
And for struggling companies, a Buffett investment is not only an infusion of much-needed capital, but also a signal to
investors and customers alike that the company has the backing
of probably the most respected investor of this and previous
generations.
The Oracle of Omaha has earned that influence through decades of wise, market-setting investments.
However, Buffett’s passing on an investment can also have the
opposite effect on a company, and this week, one stock paid the
price after Buffett shot down a rumor about a tie-up.
Warren Buffett announced plans to step down shortly after the death of his good friend Charlie Munger.
Image source: Eisele/AFP via Getty Images
CSX stock tanks after Warren Buffett denies BNSF rumors
A recent collaboration between Berkshire-owned BNSF Railway
and CSX Corp. (CSX) had some speculators convinced that a merger
between the two freight railroad companies was imminent.
However, Buffett let his friends at CNBC know that the
partnership was merely a collaboration, and not a takeover.
Buffett says he and Berkshire Hathaway Energy CEO Greg Abel met with CSX CEO Joe Hinrichs
on August 3, days after a merger between Union Pacific and
Norfolk Southern. But they only met to discuss more
cooperation, not a takeover bid.
Buffett has already denied other reports that BNSF had talked
to Goldman Sachs to facilitate a merger deal.
Related: Warren Buffett delivers blunt response to social media rumor
Instead, the two companies are collaborating to offer new direct
domestic routes between Southern California and Charlotte,
North Carolina, and Southern California, and Jacksonville,
Florida. They also plan to launch a service between Phoenix
and Atlanta, as they look to convert road delivered freight to rail.
“This collaboration between BNSF and CSX demonstrates the
power of partnership, delivering greater flexibility, efficiency, and
value for our customers,” said BNSF Group Vice President of
Consumer Products Jon Gabriel.
CSX shares were down 1.3% at last check on Tuesday
after dropping 6% the previous session.
CSX shares peaked above $37 per share on August 22 as
the rumors swirled. On Aug. 26, it was trading at $32.40 at last
check.
Buffett reveals retirement, succession plans
Earlier this year, Buffett announced that he will be stepping
down as CEO of Berkshire Hathaway, the company he took
from being a small New England textile maker, to his own
personal investment vehicle, to a massive corporation with
400,000 employees.
Able will be taking over the company after Buffett steps down, as
Buffett says he has finally started to feel old.
“I don’t have any trouble making decisions about something that I was
making decisions on 20 years ago or 40 years ago or 60 years ago,” Buffett
said in an interview earlier this summer. “I will be useful here if there’s a
panic in the market because I don’t get fearful when things go down in
price or everybody else gets scared.
“I didn’t really start getting old, for some strange reason, until I was
about 90,” he said in the interview. “But when you start getting old, it
does become — it’s irreversible.”
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