Ally Financial (NYSE:ALLY) may have a savior: Warren Buffett. Like most bank stocks, this company has been trending quickly downward since the collapse of SVB Financial’s (NASDAQ:SIVB) principal subsidiary, Silicon Valley Bank. However, it had been facing problems before that as well, with declining consumer sentiment casting a dark shadow over ALLY stock.
It’s hard to be optimistic about bank holding companies right now. That said, Ally is rising on rumors that Warren Buffett is eyeing the company for a potential takeover. As of now, that prospect is purely speculative with no direct comment from the iconic investor or Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). Still, the news has been enough to boost shares of ALLY.
How likely is this takeover? Details are still emerging, but here’s what we know so far.
What’s Happening With ALLY Stock?
Despite losing some momentum after markets opened, ALLY stock remains firmly in the green. Shares closed up by 5% today after a highly volatile past week. Speculation that Buffett will acquire the company has been mounting since a note from Gordon Haskett Research Advisors floated the possibility of the billionaire stepping in to help the banking world. Seeking Alpha reports:
“The analyst comments come after Bloomberg reported on Saturday that Buffett has been in contact with senior officials in the Biden administration in recent days regarding the regional banking crisis. The talks concern Buffett potentially investing in the U.S. regional banking sector, though the billionaire has also given some of his views about the current tumult in the sector.”
As Gordon Haskett sees it, it would make the most sense for Buffett to take over a banking company he knows well. Ally Financial fits that description. After all, Berkshire owns roughly 29.8 million shares of ALLY stock as of the end of December, equal to a stake of just under 10%. This makes Berkshire the company’s second-largest shareholder, behind only Vanguard. Other bank stocks that Buffett owns include U.S. Bancorp (NYSE:USB), Citigroup (NYSE:C) and BNY Mellon (NYSE:BK). However, Berkshire does not have as big of a percentage in these other firms.
This makes for a compelling case that Ally may be high on Buffett’s list of bank holding companies to take over. A takeover would also certainly provide the stability Ally needs to get back on its feet. Still, Buffett may be deterred from acquiring the company due to its high exposure to the troubled auto loan industry. This includes its strong ties to Carvana (NYSE:CVNA), a troubled meme stock that has fallen more than 75% over the past six months.
What Comes Next?
Above all, it’s important to remember that discussion of a Buffett-Ally takeover is still purely speculative. The Oracle of Omaha hasn’t actually made any statements to suggest he has set his sights on the company. What’s more, while he could certainly increase his holdings in ALLY stock, Warren Buffett could also shift his focus to other companies in the banking space for a better deal.
While these rumors have helped push ALLY stock up, the situation is still hypothetical. The potential for a takeover could dissolve at any moment.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
