Berkshire Hathaway may split B shares

Sarah Gardner Jan 19, 2010
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Berkshire Hathaway may split B shares

Sarah Gardner Jan 19, 2010
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Kai Ryssdal: The long-sought, but never-consummated deal for Kraft to buy the English chocolatier Cadbury has finally come to a conclusion. Kraft announced this morning a sweetened offer of more than $19.5 billion — is what it took to get the deal done. It will be offering more cash instead of stock this time around. The stock having been a sticking point for the biggest owner or Kraft shares — Warren Buffet.

Interestingly, investing directly in the billionaire’s holding company is about to get a whole lot cheaper. Berkshire Hathaway shareholders are expected to approve a stock split of Berkshire’s class B shares tomorrow. They closed at a mere $3,332 apiece today. After the split they will sell for a measly 66 bucks a pop. Marketplace’s Sarah Gardner reports the move could attract a lot more short-term investors.


SARAH GARDNER: Owning a piece of Warren Buffett’s empire has never been cheap. Berkshire Hathaway’s “A” shares were trading today for around $99,000 each. Buffett started issuing the lowlier “B” shares in 1996 to give small investors a piece of the action but even those stocks sell for thousands. Tomorrow Berkshire’s shareholders will vote to split the “B” shares 50 for 1. That means somebody owning one “Baby Berkshire” will suddenly have 50 babies instead.

NYU finance professor Aswath Damodaran says the cheaper stock price will make Baby Berkshires more accessible to the masses, but they’re still a second-class stock.

ASWATH DAMODARAN: The problem remains that you don’t get a say in how the company’s run if you don’t have a vote.

B shareholders don’t have a vote at Berkshire stockholder meetings. Still, the stock’s cheaper price means more Berkshire shares will be bought and sold more frequently. But this split also helps smaller shareholders at Burlington Northern, the railroad Berkshire is buying, avoid higher taxes when Buffett pays them.

Paul LaMonica, editor at large at CNNMoney.com, says the split doesn’t alter the fundamentals.

PAUL LAMONICA: It really doesn’t change anything about that company’s value even though it may be, quote unquote, cheaper to buy one individual share. The company is still worth the same amount the day after the split that it was the day before.

Buying Berkshire Hathaway means investing in everything from underwear maker Fruit of the Loom to soft-serve giant Dairy Queen.

I’m Sarah Gardner for Marketplace.

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