Bending Spoons shares (BSP) surged on Wednesday after Berkshire Hathaway invested another $330 million in the Italian technology company, bringing its total investment to $930 million and increasing its stake to approximately 4%.
The stock climbed 42% during Wednesday’s trading.
The rally followed news that Berkshire, the conglomerate formerly led by Warren Buffett and now headed by CEO Greg Abel, had purchased additional shares in the company, which acquires and transforms digital businesses.
Bending Spoons will issue 10 million ordinary shares to Berkshire at $33 apiece through a private placement.
The price represents a discount to Tuesday’s closing price of $37.86, even as the stock rallied sharply following the announcement.
The investment makes Berkshire the Italian company’s sixth-largest investor, according to LSEG data.
Bending Spoons said the funds would strengthen its financial flexibility and support its acquisition strategy.
Berkshire’s investment boosts Bending Spoons stock
Berkshire invested $600 million in Bending Spoons’ initial public offering in July before committing an additional $330 million.
The latest purchase brings its total investment to $930 million.
The market reaction suggests investors view Berkshire’s participation as an endorsement of Bending Spoons’ strategy of acquiring digital businesses and seeking to improve their performance.
The company has assembled a portfolio that includes AOL, Vimeo, Evernote, Brightcove, Eventbrite, productivity software maker Airtable, pet-tracking company Tractive and file-sharing platform WeTransfer.
In September, Bending Spoons also agreed to acquire Miro in a $1.4 billion deal.
The company continues to evaluate merger and acquisition opportunities and has a strong pipeline, according to Francesco Patarnello, its co-founder and head of business acquisitions.
Bending Spoons said the latest investment would provide additional financial flexibility as it pursues further acquisitions.
Valuation raises questions despite the rally
Despite Wednesday’s surge, Bending Spoons trades at a substantial valuation relative to its projected financial performance.
The company has a market value of around $40 billion, based on the share count implied by its announcement, and had approximately $4 billion in debt at the time of its IPO, according to Barron’s.
The stock trades at nearly 10 times forward sales based on enterprise value, which includes market capitalisation and debt. It also trades at around 30 times projected 2027 earnings.
Berkshire’s investment could generate a substantial paper gain following Wednesday’s rally.
Barron’s estimated that the conglomerate was sitting on a profit of approximately $600 million after the stock’s rise.
The $33 placement price also means investors buying after the rally are paying considerably more than Berkshire paid for its latest shares.
Berkshire expands technology exposure under Greg Abel
The investment comes as Berkshire has increased its exposure to technology companies under Abel, who took over as chief executive at the start of the year.
The conglomerate has also built a significant position in Alphabet, Google’s parent company, which became its third-largest common stock holding. Berkshire’s largest stock investments include Apple.
The shift towards technology marks a notable development for a company long associated with Buffett’s value-investing philosophy.
Berkshire has historically favoured businesses trading at attractive valuations, including Japanese trading companies and homebuilder Lennar.
Bending Spoons’ valuation contrasts with some of those traditional investments.
Its shares trade at nearly 10 times forward sales, while Berkshire’s previous investments have often focused on lower earnings multiples or businesses trading below book value.
The latest purchase may therefore raise questions about how Berkshire is balancing its traditional investment approach with opportunities in technology.
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