Berkshire Hathaway Share Split: Understanding the Basics

A share split is a way for Berkshire Hathaway to make its stock more affordable for investors. Berkshire Hathaway has split its stock three times since its inception in 1965.

The first split occurred in 1965, when the stock was split 50 to 1. This means that one old share was divided into 50 new shares. This type of split is also known as a "reverse split."

Berkshire Hathaway's share price has been a topic of interest for many investors. The class A stock price is much higher, with one class A share trading for exactly $557,075 at the time of this writing.

If you divide the class A stock price by 1500, you get $371.38, which is incredibly close to the $367.44 that the class B stock is currently trading at.

Warren Buffett resisted the idea of splitting Berkshire Hathaway's stock for a long time, but in 1996, he and the board of directors introduced class B shares to make the stock more accessible to investors.

Consider reading: Time Share Prices

Berkshire's stock was already trading at more than $30,000 per share at the time, making it out of reach for many investors.

The class B shares were introduced at 1/30th of the price of class A shares, and then split 1/50 in 2010.

Now, the class B shares represent 1/1500 of the A shares, and the prices of both classes of shares move in tandem, never deviating much from the 1/1500 ratio.

Berkshire Hathaway's stock has technically never been split, but rather a new class of shares was created about 20 years ago, making the stock more accessible to investors.

The high price of the class A shares is a deliberate choice by Warren Buffett, who believes it helps attract investors focused on the long term.

Broaden your view: Class a Share

Berkshire Hathaway's Class A and Class B shares have distinct differences, particularly when it comes to voting rights and convertibility. However, you can only convert Class A shares into Class B shares, not the other way around.

The price of Class A shares is significantly higher than Class B shares, with Class A being equivalent to 1500 Class B shares. This means that if you own Class A shares, you can convert them into Class B shares at any time.

The ratio of Class A to Class B share price is almost always 1:1500, with the Class A share price being exactly $557,075 at the time of writing. This means that the Class B share price is currently $367.44.

If you own Class A shares and need to sell some of your holdings, you can sell Class B shares instead, which provides more flexibility due to their lower price. For example, if you need $10,000, you can sell a few Class B shares instead of an entire Class A share.

Warren Buffett favors Class A shares, but notes that Class B shares can be a better buy if they are trading at a 1% discount compared to the Class A share price. This means that if you multiply the Class B share price by 1500 and it's 1% less than the Class A share price, then Class B shares are a better buy.

Broaden your view: What Penny Shares to Buy

Berkshire Hathaway's performance has been impressive, especially during times of global uncertainty.

The company's A-class stock has consistently closed at record-breaking prices, with the highest being $539,180 on March 28, 2022.

Its A-class stock is the world's most expensive share, having closed at $447,154 on August 19, 2022.

The price of the more affordable B-class shares has also seen significant growth, with an all-time high of $359.57 on March 19, 2022.

As of August 23, 2022, the fair value rating for the A-shares was $537,000 a share, and $357 for the B-shares, according to a sector strategist at Morningstar.

This suggests that the shares are "modestly undervalued", providing a potential opportunity for investors.

The price of the B-class shares stood at $297.28 as the market closed on August 19, 2022.

A stock split is a corporate action that involves dividing each of a company's shares into multiple shares, increasing the total stock in the company.

The company's overall market capitalization does not change, but the price per share does. This means that if a company splits its stock by 2, the investor's total investment will still be worth the same, but the value per share will be lower.

Berkshire Hathaway has two classes of common stock, designated as A-class and B-class, and has a history of stock splits. The B-class shares were introduced in 1995 and were split in January 2010.

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A stock split is a corporate action that involves dividing each of a company's shares into multiple shares, increasing the total stock in the company.

This action has the effect of revaluing the price per share, but the company's overall market capitalization remains the same.

For example, if an investor owns 100 shares valued at $50 each, the total value of their investment is $5,000.

The investor will then own 200 shares, but each will only be worth $25, still making their total investment worth $5,000.

A stock split does not change the company's overall market capitalization, it simply adjusts the price per share.

See what others are reading: Earnings per Share Dilution

Berkshire Hathaway's stock has technically never been split, but a new class of shares was created about 20 years ago.

The company's stock price was high in comparison to the rest of the market, but many retail investors could still afford to buy a share if they wanted.

Berkshire introduced B-class shares in 1995 after the share price soared above $30,000, prompting concerns about the "threatened creation of unit trusts".

The B-class shares were split in January 2010, when they were around $3,500.

Berkshire shareholders approved a 50-for-1 stock split as a way to improve accessibility to potential investors, but this was not for the A-class shares.

The A-class stock price is much higher, with one class A share equivalent to 1500 class B shares.

The class A stock price follows a 1/1500 ratio with the B-class stock price, which has been consistent over time.

If you own class A shares, you can convert them into class B shares at any time, but not the other way around.

For your interest: What Not to Do When Sharing Your Testimony?

Berkshire Hathaway's Class A shares are unlikely to be split again. The company's management team has not shown any intention to do so.

The Class B shares, which are owned by most of Berkshire's investors, have already been split in 2010 to make a direct investment in the company more accessible to ordinary investors.

It's possible that the Class B shares could be split again in the future, but only if they have appreciated significantly in value.