Here’s Why Warren Buffett Will Never Split
It was the first time the stock had closed above half a million dollars and helped push the company’s market capitalization above $730 billion. Berkshire is currently the 6th most valuable company in the United States.
Berkshire Hathaway’s Class A stock has long been one of the most expensive stocks investors can buy, and as a result, investors have repeatedly asked Buffett about the possibility of a stock split. It is a company’s division of its shares to decrease the price and increase the total number of shares outstanding.
In response to expectations, Berkshire introduced cheaper Class B shares in 1996, at $341 – essentially more affordable. But he has also consistently refused to split the company’s original Class A stock. Buffett has argued that it is because of this rejection that the company has achieved a remarkable track record in increasing its value.
At the 1995 Berkshire Hathaway shareholders’ annual meeting, Buffett admitted that owning such a high-priced stock (which at the time was trading around $25,000) could be very difficult for him. investors, especially when it comes to giving away shares. But he said it was intentional to put a barrier to becoming a shareholder.
He said: “We want to attract investment-oriented shareholders like us who have a long-term vision. If we split the stock and reduce the price, we will have a group of shareholders without the harmonized and in sync with our goals, unlike our current shareholder group.”
Berkshire currently has just over 615,000 Class A shares outstanding, compared with about 1.3 billion Class B shares outstanding.
Buffett added that he sees no benefit in owning a stock that’s cheaper but more volatile if it doesn’t create “intrinsic value” for investors. “There are a lot of people who are attracted to stocks that are going up. It doesn’t attract us. We don’t care if it sells for a higher price, except when the intrinsic value of that stock goes up. “, he said.
As recently as 2011, Buffett’s longtime “right-hand man”, Charlie Munger, said that Buffett has a joke he likes to repeat to his elderly friends: “May you live until you live until the end of time.” when stock A splits”.
There have been a number of famous stock splits in recent years, with Amazon and Google parent Alphabet both announcing their 20-share splits, giving away their 1 share when they hit $3,000 a year in December. this early year. Before that, in 2020, Apple and Tesla both split their shares as their valuations skyrocketed.
By: CNBC
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