Warren Buffett's Berkshire Hathaway is sending a plan to split the iconic company's Class B shares to a shareholder vote as part of its plan to buy the Burlington Northern Santa Fe.
Holders of the relatively low-cost shares will vote on a 50-for-1 stock split, already approved by the Berkshire Hathaway board. The date of the vote has not been set.
Berkshire Hathaway said Tuesday that the split is needed to issue B-shares as part of the $26 billion buyout of the Burlington Northern Santa Fe, the largest acquisition in the company's history. Berkshire already owns 22 percent of the railroad.
The majority of the shares issued in the $100-per-share deal will be Class A shares, but holders of smaller amounts of Burlington shares who opt for a share exchange rather than cash will receive Class B shares.
Class A shares are not being split. Class B common shares, dubbed "Baby Berkshire," was first issued on May 8, 1996. It was created to meet demand from investors who wanted to share in Buffett's legendary investment expertise, but couldn't afford Berkshire Hathaway's original stock.
Class A shares [BRK.A 100150.00 --- UNCH (0) ] remain the highest priced on the New York Stock Exchange. The shares closed Monday at at $98,750. The Class B shares [BRK.B 3314.1399 --- UNCH (0) ] ended the session at $3,265.
With the split, each Class B share will be worth $65.30. Berkshire to Buy BurlingtonBuffett Sells More Moody's After Stock ReboundsWarren Buffett Watch BlogStanley Works to Buy Black & Decker for $4.5 Billion Class B shares can never sell for anything more than a tiny fraction above 1/30th of the price of A, according to Berkshire documents. When it rises above 1/30th, Class A shares are purchased and converted to B shares to push it back to the intended ratio.
A Class B share has 1/200th of the voting rights of a Class A share. Class A shares can currently be converted into 30 Class B shares.
The conversion privilege does not extend in the opposite direction.
...........
So, let's extend their poll to the FW community. Would you buy at $50-$70 a share for baby Berkshire?
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The price is irrelevant. After this split, The total shares outstanding increases 50 fold so the potential 50x extra shares you can get a lower price is meaningless as it will equal to 1 share pre split.
That being said, many mutual funds hold Berkshire B, so might want to check your funds in your 401k to see if you already have exposure.
This matters only if you believe that BRK will now find its way onto the SP500. It was not listed in the past due to its high price. If it earns a place then one stock will get bumped from SP500. Figure out the top 5 stocks most likely to get bumped and short them.
The price is irrelevant. After this split, The total shares outstanding increases 50 fold so the potential 50x extra shares you can get a lower price is meaningless as it will equal to 1 share pre split.
I know a few friends/family that won't buy shares in stocks that are priced too high. They say the shares are too "expensive", and think along the line of "Why buy this at $100 when I can buy that for $10?".
with this kind of split, more individuals are able to invest. i know i can't just fork over $3k+ for one share of a stock. I can, however, afford $1k or so towards multiple shares, even though it obviously is only worth 1/50 of what it was.
narshe14 said: I know a few friends/family that won't buy shares in stocks that are priced too high. They say the shares are too "expensive", and think along the line of "Why buy this at $100 when I can buy that for $10?".
I'm sure Buffet is thrilled that your Uncle Joe is now willing to invest a few hundred dollars of equity capital into his company.
"Berkshire Hathaway Inc.’s planned 50- for-1 stock split will put its Class B shares within reach of investors Warren Buffett once called an “inferior” class."
Buffett's 1983 Annual Report said:Were we to split the stock or take other actions focusing on stock price rather than business value, we would attract an entering class of buyers inferior to the existing class of sellers. Would a potential one- share purchaser be better off if we split 100-for-1 so he could buy 100 shares? Those who think so and who would buy the stock because of the split or in anticipation of one would definitely downgrade the quality of our present shareholder group.
"Berkshire Hathaway Inc.’s planned 50- for-1 stock split will put its Class B shares within reach of investors Warren Buffett once called an “inferior” class."
Buffett's 1983 Annual Report said:Were we to split the stock or take other actions focusing on stock price rather than business value, we would attract an entering class of buyers inferior to the existing class of sellers. Would a potential one- share purchaser be better off if we split 100-for-1 so he could buy 100 shares? Those who think so and who would buy the stock because of the split or in anticipation of one would definitely downgrade the quality of our present shareholder group.
hell, BB called us devil customer's, but as long as they can make us money, we still use them!
I think it would be a bad idea for them to split 50:1, im guessing they would dilute voting power down even more also which at a 50 would 1/10000th of a vote.
tripleB said:This matters only if you believe that BRK will now find its way onto the SP500. It was not listed in the past due to its high price. If it earns a place then one stock will get bumped from SP500. Figure out the top 5 stocks most likely to get bumped and short them.
Hey, remember that BRK/B don't pay no "dividents" so you ought to like it even if ain't in the 500.
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I'm not liking this a bit. Buffet's standard philosophy for BRK.A and BRK.B is that he doesn't believe in splits or dividends. he just wants the stock price to go up. At the 3K range, I personally like it because it tends to bring down the volatility of BRK.B I can tell you as owning a number of BRK.B's, it doesnt make me happy at all..it actually makes me feel like selling.
As far as people not wanting to buy it at such a high price, it never made sense to me. if you are going to buy 3K worth of stocks what's the difference if you are getting 3K of $10 stocks or 3K of $3,000 stocks. it's the same commission and same dollar amount. if the stock goes up 5%, it's still 5% of $3,000....people are silly.
FWIW Buffet is old and when he dies I imagine a sharp immediate decline in the value of the stock price. It should recover once the fear settles and I hope to buy during that sharp decline. Of course that may not happen for 10 years and the stock may go up 500% between now and then, but it's a risk I am willing to take as part of my speculation.
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