Berkshire Hathaway A-share hits $500,000: Why Warren Buffett still doesn’t want a stock split

• Berkshire Hathaway A shares cost more than $500,000 for the first time
• Buffett categorically against stock split on A-share
• B shares as a cheaper alternative, for which different rules apply

Warren Buffett is an investment legend – and the price for his holding company Berkshire Hathaway’s A shares is at least as legendary as he is. The share certificate has long been in the six-figure range and is one of the most expensive stocks in the world, but now it has broken a new mark: On March 16, Berkshire A shares on the NYSE closed above the $500,000 mark for the first time. Dollar, after having just barely reached this mark during the previous two days of intraday trading. The paper currently costs a little more than half a million US dollars at 521,781 US dollars (as of the closing price on March 24th, 2022).

Other companies such as Amazon and Alphabet have recently announced a stock split at significantly lower prices in order to make their shares more accessible. But with Berkshire Hathaway’s A-share, despite the astronomically high price level, there is still no split in sight – and that is likely to remain the case during Warren Buffett’s lifetime, because the star investor has clearly spoken out against such a measure in the past.

These are the reasons why Warren Buffett is against an A-share split

There are about 615,000 Berkshire Hathaway A shares outstanding, but an average of only about 2,000 are traded per day, according to MarketWatch. This is probably mainly due to their high price – and is in the spirit of Warren Buffett, who is a strong advocate of the buy-and-hold strategy and also proceeds accordingly with his own investments. A split would make the share look cheaper, attracting more investors and thus more trading – possibly also for speculative purposes. Therefore, Warren Buffett gave a clear rejection of a stock split at the shareholders’ meeting in 1995 – when the A share cost about $25,000. According to “CNBC”, the star investor explained at the time that the barrier to entry was intentional due to the high price. The aim is to only attract those shareholders who have a long-term horizon and are as investment-oriented as possible. In his view, a stock split would only result in investors’ goals being out of sync with those of Berkshire Hathaway. “There are a lot of people who are attracted to stocks that are moving up. We’re not attracted to that. We don’t care about selling them higher unless the intrinsic value is growing,” Buffett said, according to CNBC. According to “The Motley Fool”, the oracle of Omaha also wrote in one of its shareholder letters that the high price – and the associated barrier to entry – offered protection against volatility and the development of a speculative bubble, and ultimately also protected Berkshire Hathaway’s excellent reputation.

While Berkshire Hathaway’s A-share price has risen sharply since then, there’s no sign that Warren Buffett has changed his mind. In 2011, Berkshire vice president and Buffett confidante Charlie Munger told CNBC that Warren Buffett would often jokingly tell him, “May you live until the A share splits.” It is therefore unlikely that this will happen during the lifetime of Munger or Buffett. However, their successors at Berkshire Hathaway might see things differently later on.

Buffett allowed stock split on B-share

However, things are quite different for Berkshire Hathaway’s B stock. It was introduced in 1996 with a view to small investors, for whom the A share was already unaffordable at the time – in lieu of a stock split, so to speak. A B share has a 1:1,500 ownership and 1:10,000 voting ratio of the A share and is much cheaper than the stock market at a current price of “only” $352.55 A share (status: closing price on March 24, 2022). As quoted by The Motley Fool in the letter to shareholders at the time, Buffett called the issuance of the additional class of shares a “response to the looming creation of mutual funds […], which would have marketed themselves as Berkshire clones. In the process, they would have used our past and definitely unrepeatable performance to lure retail investors and would have imposed high fees and commissions on these innocents”. Since the investment professional clearly disliked this concept, Berkshire Hathaway has since offered retail investors a direct investment opportunity via the B share .

In the case of B shares, Buffett apparently does without the otherwise very desirable entry barrier – and probably also takes a more relaxed view of the topic of stock splits. Because according to “Investopedia”, the B share was already split in a ratio of 1:50 in January 2010. Before the split, the B share price was around $3,500. But the high price was apparently not the sole criterion for the share split. According to “The Motley Fool”, this was also necessary, among other things, to facilitate the takeover of BNSF Railroad, which was partly financed with shares. So Warren Buffett is not categorically opposed to such a measure – unless it’s about Berkshire Hathaway’s A shares.

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