On Tuesday, July 29, 2025, VeriSign Inc. (NASDAQ: VRSN), a leading provider of domain name registry services and internet infrastructure, experienced a significant decline in its stock price, falling more than 7% in early trading. The catalyst for this abrupt sell-off was the announcement that Warren Buffett’s Berkshire Hathaway had divested approximately one-third of its stake in the company, selling 4.3 million shares at $285 each for a total of $1.23 billion. This transaction, executed at a 6.9% discount to Monday’s closing price of $305.98, reduced Berkshire’s ownership from 14.2% to 9.6%, with the potential for an additional 515,032 shares to be sold to meet market demand. The move has sent ripples through the investment community, prompting questions about Buffett’s rationale and the broader implications for VeriSign’s valuation and market perception.
A Strategic Exit: Why Did Buffett Sell?
Berkshire Hathaway’s decision to trim its VeriSign holdings marks a notable shift, given the conglomerate’s long-standing investment in the company since 2012. Over this period, VeriSign’s stock has appreciated nearly 700%, transforming Berkshire’s initial investment of approximately $674 million into a position worth $4.07 billion as of late March 2025. The sale, which generated a substantial profit, appears to align with Buffett’s broader strategy of capital reallocation amid a market environment he has described as lacking compelling opportunities. In his 2024 annual letter, Buffett emphasized a disciplined approach, stating, “Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities.”
The sale was explicitly intended to reduce Berkshire’s stake below the 10% threshold, which triggers additional regulatory obligations under U.S. securities laws. VeriSign confirmed this in its announcement, noting that Berkshire’s remaining holdings are subject to a 365-day lock-up agreement, signaling a deliberate move to avoid regulatory complexities rather than a complete exit. However, the timing and scale of the transaction have raised speculation about other potential motivations, including valuation concerns or a reassessment of VeriSign’s growth prospects.
Baird Equity Research analyst Rob Oliver, who maintains an “outperform” rating on VeriSign, suggested that the sale “could drive near-term weakness and questions around Berkshire’s ultimate intentions with the stock.” He emphasized that VeriSign’s core business remains robust, driven by strong domain growth trends. Despite the sell-off, Oliver’s analysis underscores the company’s enduring competitive advantages, or “moat,” in the internet infrastructure space.
VeriSign’s Business: A Digital Fortress with High Margins
VeriSign operates a critical component of the internet’s backbone, managing the registries for .com and .net domains and supporting DNS queries while maintaining two of the internet’s 13 root servers. Founded in 1995, the company emerged as a key player during the dotcom boom and has since solidified its position as a regulated utility-like business with predictable cash flows. Its exclusive contracts with ICANN (Internet Corporation for Assigned Names and Numbers) for .com and .net domains, which allow for controlled price increases (6-10% annually), ensure stable revenue streams. For the 12 months ending Q3 2024, VeriSign reported a net margin of 55.7%, ranking fifth in the S&P 500, alongside tech giant Nvidia. Its gross margin of 88% and operating margin of 71% further highlight its financial strength.
Despite its flat stock performance in 2024, declining 1.38% year-to-date compared to the S&P 500’s 25% rise and the Nasdaq’s 30% gain, VeriSign’s fundamentals remain compelling. The company has aggressively returned capital to shareholders through share buybacks, reducing outstanding shares from 119 million in 2019 to 97 million by Q3 2024, a 5.8% year-over-year drop. This strategy has bolstered earnings per share, making the stock attractive to value investors like Buffett. However, at a price-to-cash-flow ratio of 27.2 and a price-to-sales ratio of 12.7, VeriSign’s valuation is not inexpensive, potentially prompting Berkshire to lock in gains.
Market Reaction and Investor Sentiment
The immediate market reaction to Berkshire’s sale was pronounced, with VeriSign’s stock dropping sharply in pre-market and early trading on July 29. The discounted sale price of $285, compared to the prior close of $305.98, amplified the sell-off, as investors interpreted Buffett’s move as a signal of caution. Social media platforms, including Reddit’s r/ValueInvesting, buzzed with debates about the sale’s implications. Some users speculated that Berkshire’s portfolio managers, Todd Combs or Ted Weschler, who often oversee smaller tech investments, may have driven the decision, while others questioned whether VeriSign’s lack of a dividend or its flat performance over the past five years justified the trim.
Analysts, however, remain cautiously optimistic. The consensus price target for VeriSign, based on ratings from three analysts, stands at $243.67, with Baird’s most recent target of $216.67 implying a modest 3.67% upside. GuruFocus estimates VeriSign’s intrinsic value (GF Value) at $238.07, suggesting the stock is modestly undervalued with a price-to-GF-value ratio of 0.86. The company’s GF Score of 91/100 further indicates strong outperformance potential, driven by a profitability rank of 10/10 and a growth rank of 9/10.
Buffett’s Broader Portfolio Strategy
Berkshire’s sale of VeriSign shares fits into a broader pattern of portfolio pruning in 2025. The conglomerate has been a net seller for 10 consecutive quarters, amassing a cash pile of $347.7 billion as of March 2025. Notable divestitures include a significant reduction in its Apple stake, which remains Berkshire’s largest holding. Buffett’s restraint reflects his belief that current market valuations offer few opportunities for value-driven investments. VeriSign, while a strong performer, may no longer meet Berkshire’s stringent criteria for holding at its current price, especially as Buffett prepares to transition leadership to Greg Abel, who will assume the CEO role by year-end.
Implications for VeriSign and Investors
For VeriSign, the immediate challenge is restoring investor confidence amid the post-sale volatility. The company’s fundamentals—high margins, a durable moat, and steady domain growth—remain intact, but the stock’s near-term trajectory may hinge on broader market sentiment and Berkshire’s potential additional sales. Long-term investors may view the dip as a buying opportunity, given VeriSign’s critical role in internet infrastructure and its history of resilience.
For the market, Buffett’s move serves as a reminder of his disciplined approach to capital allocation. While the sale has sparked speculation, it does not necessarily signal a lack of faith in VeriSign’s business model. Instead, it reflects Berkshire’s strategic prioritization of liquidity and regulatory simplicity in a frothy market environment. As investors digest this development, VeriSign’s ability to sustain its financial performance and capitalize on digital growth trends will determine whether it can reclaim its upward momentum.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consult financial advisors before making investment decisions.