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- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 1
Just checked for the first time in a while and seems as though the premium on the A's is way down. I wonder what changed.
No. of Recommendations: 8
Indeed, currently about 1500.9 : 1
(comparing midpoints of bid/ask)
Three possible explanations spring to mind
(a) Berkshire is not buying at these levels, so there is not an "extra" demand for A shares
(b) Traders think Berkshire is not buying at these levels, so they are backing off on what they will trade A shares for
(c) Random fluctuation for reasons no-one will ever know.
Jim
No. of Recommendations: 1
Out of curiosity...what was the ratio(s) when it was further out of sync?
0.9:1 is pretty darn tight.
Interesting topic, thx.
m
No. of Recommendations: 6
Out of curiosity...what was the ratio(s) when it was further out of sync?
I think figures in the range 1515:1 to 1522:1 were pretty typical during the last half of 2023.
More variable and lower this year, with 1505-1510 being pretty typical in the last 6 months.
But that's using closing figures, which aren't the best way to measure it. The B shares trade in the closing auction and the A shares generally don't.
I would venture to say that if (if) Mr Buffett were buying shares today, he would definitely be buying A shares, not B shares.
But I doubt this is a repurchase day.
Jim
No. of Recommendations: 2
But that's using closing figures, which aren't the best way to measure it.
I don't think you can use ANY figures to properly measure it. That's because the As don't trade nearly as much as the Bs, and the As have a rather wide bid/ask during the time that they aren't trading. For example, right now, the bid/ask is $655,329.91/$655,995.00, and BRKB last trade is $437.48. So the ratio on the bid side is 1498 and the ratio on the ask side is 1499. But the bid and ask constantly are changing even though none of the As may be actually trading.
Now, a few minutes later, 3 As have traded (at $656,785.01) and the bid/ask is $656,460.03/$657,119.88, and the Bs are constantly trading in quantity, now at $437.57. So 1501 ratio using last trade, 1500 at bid and 1502 at the ask.
The other thing that may influence the number a little is the fact that the As have no options and the Bs do. Sometimes option trades can influence the stock price as large option trades are settled, and the As because they trade much less frequently only catch up to the Bs (ratio-wise) a bit later.
No. of Recommendations: 9
I don't think you can use ANY figures to properly measure it. That's because the As don't trade nearly as much as the Bs, and the As have a rather wide bid/ask during the time that they aren't trading.
The standard method for determining a price is simply to take the midpoint of the (best) bid and (best) ask across all trading venues. That's what brokers are required to do for mark-to-market at day's end (NBBO), and it makes a lot of sense. The gap may be bigger or smaller for various securities, but the best way to think of it is that the midpoint is the "real" market price, and the gap to either side is just the current cost of trading it. Looking at the ratio using the bid of one and the midpoint (or ask, or bid) of the other isn't really meaningful.
For Berkshire, the only time the A:B ratio using midpoints jumps around much during the day is when somebody is in the middle of trying to trade an A share and the bid (or ask) for the A shares is moving towards or past the prior midpoint...until the trade completes. Then the mid/mid ratio generally returns to the current norm.
Whether the last trade was an A or a B, or whether there are options or not, isn't really important. The most meaningful current "price", for whatever it's worth, is set by the bid and ask.
Jim
