Buy Berkshire Hathaway for $70 per share?
Warren Buffett’s Berkshire Hathaway Inc. is getting ready to split the company’s Class B shares next Thursday as part of its plan to buy Burlington Northern Santa Fe Corp. The 50-for-1 stock split, which shareholders will vote on Wednesday, will boost the liquidity of Berkshire’s stock, and enable Berkshire to offer even small BNSF shareholders Berkshire stock as part of its $26.3 billion cash and stock deal.
The added liquidity Berkshire will have as a result of the split will also increase the chances that the Omaha-based company will join the S&P 500 index. Berkshire’s Class A shares, which are the nation’s most expensive stock, and its Class B shares have been difficult to trade because of their high prices.
Berkshire’s Class A shares, which sold for $97,500 Friday, are not being split.
On May 7, 1996, anybody who wanted to buy a single share of Warren Buffett’s company would have had to pony up about $33,000.
But that May 8 — as Bill Clinton contemplated his re-election strategy, Larry Page and Sergey Brin started work on a search engine that would become a verb, and final preparations were made for the Atlanta Summer Olympics — Berkshire Hathaway suddenly became more in reach for small-time investors.
That was the date on which Berkshire issued a second class of stock — B shares. The
new shares would be worth 1/30th of the A shares. When BRK-B opened for trading on May 9, shares went for $1,110.
This Thursday it appears that the “Baby Berkshires” will be even more accessible to small investors.
Berkshire shareholders will gather in Omaha on Wednesday to vote on splitting the B shares — which now trade for around $3,250 — 50 to 1. The vote is being taken to facilitate Berkshire’s purchase of Burlington Northern Santa Fe Corp., as it would allow smaller BNI shareholders to get Berkshire B stock should they choose that instead of cash. But the Berkshire board has also made clear that it supports splitting the stock regardless of whether the BNSF deal goes through. BNSF shareholders are scheduled to vote on the $100-a-share offer Feb. 11, and the deal is expected to close in the first quarter.
It’s a near certainty that the split will be approved Wednesday in Omaha. Buffett controls about a third of the voting power, and he’s made clear that he favors the split. Other shareholders will follow.
Though Berkshire hasn’t announced when the split will actually occur, the Associated Press is reporting that it will happen Thursday. Buffett didn’t comment for the article.
Post-split, assuming there isn’t much movement in the price beforehand, BRK-B shares will trade for about $65 each — by far the most affordable they’ve ever been. It’s been several decades since an A share traded that cheaply.
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