Subject: Re: Rational Walk on BRK/BHE
Interesting piece from Rational Walk on BRK acquiring the balance of BHE. Well worth a read...

Indeed. An excerpt:

I wrote about Greg Abel’s sale of his 1% stake in BHE of 740,961 shares for $870 million which implied a price per share of $1,174.15. Just a little over two years later, the Scott family has sold for just $650 per share. This implies that BHE’s valuation has dropped from ~$88.8 billion to ~$48.9 billion, a decline of nearly 45%. It is interesting to note that a prior transaction to repurchase some of Mr. Scott’s interest in March 2020 implied a valuation of $53.4 billion. It would appear that Greg Abel received a rich price for his shares in retrospect. Mr. Abel subsequently used part of the cash proceeds to purchase shares of Berkshire Hathaway in September 2022.
...

Walter Scott Jr. was a longtime friend of Warren Buffett, a Berkshire Hathaway board member, and a partner in BHE since Berkshire took its initial ownership stake nearly a quarter century ago. I believe that Mr. Buffett did not seek any advantage for Berkshire when estimating BHE’s market value in the company’s transactions with Mr. Abel and with Mr. Scott’s family. However, he also clearly insisted on a lower valuation now that BHE’s future prospects seem dimmer.


I agree that Buffett likely set rational parameters to evaluate Abel's and Scott's minority shares and offered to repurchase them at a fair price, so I agree with RW's conlusion : BHE's valuation has dropped, almost by half, given the current regulatory uncertainties, and Berkshire is unlikely to plow a lot of capital into this business, one of the two utilities we thought might be able to absorb a lot.

It makes the quandary of what to do with $300b in cash all the more acute, especially with stock market prices at record highs. But maybe we should look at this differently. Starting at levels like today's, it seems like a reasonable hope that there might be a pretty major correction in the next few years. And while it would be nice for this to happen while Buffett is still in charge, that might not be our best bet - he has actually not proven himself to be particularly greedy, the last 2 times the world was feeling fearful, so why would he be, next time? Maybe having all that cash on hand when Abel/Combs/Wexler are in charge will actually turn out to be a good thing.

dtb