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WEB has paid as high as $367?b? Any takers?

I’m buying… Just funded our Roths and HSAs… all going toward B shares.

WEB has paid as high as $367?b? Any takers?

Well, to be picky, the top known [average in a month] price paid has been $550,813.96 per A share, which divided by the 1500:1 economic interest ratio gives your $367.20.

But since you're quoting the figure in B shares, one might consider the A:B share price ratio.
Management seems to have a strong preference for A shares lately--the highest known [average in a month] price to date for B shares is $357.22, ten bucks lower.
So if you're talking omens about the value of B shares, arguably that's the number to consider.

For those who like to read too much into things:
The preferred ratio of A to B price of management seems to have changed.
If you look only at the months that they bought both A and B shares, the ratio of the average A price to the average B price has been rising on trend for quite a while.
That ratio has been rising at about half a B share per month in the last 4.7 years.

This could alternatively be partially explained as follows:
They do like to get a good deal. During sharp selloffs when they might be buying more, B shares tend to sell off harder, and that's the days they buy the most, so the A:B ratio is higher on those days, skewing the averages.

Jim

What are the chances we ever(10 - 20 years) have one class of shares ?

How difficult would resolving the voting power disparity be ?

Just musing but the different voting power has always bothered me - but not enough to make me sell.

Yes I hold only B's (25 years).

Best to all.

“What are the chances we ever(10 - 20 years) have one class of shares ?”

I respect your preference but I think it is very slim. This issue has been so dear to Warren’s heart and it does reward the most loyal of the long-term (A) shareholders who are typically most aligned with Warren and the Board’s philosophy. Warren has been very up front from day 1 from the birth of the B shares in ‘96 as to their diluted strength of their vote, but I understand his thoughtfulness and philosophy.

Of course, it benefits the most loyal and affluent huge shareholders, but I trust their passion and thoughtfulness on voting issues more than say casual B traders/ speculators and institutional owners like Blackrock/vanguard that may have their own agenda in voting a certain way. It also diminishes the chance of activists trying to make noise and influence the special Berkshire Board and culture.

So even though the vast majority of our shares are B shares, I am in support of Warren’s thoughtfulness and perspective on this issue long-term. His philosophy over the years has selected for very high quality and quite loyal shareholders. For all other purposes and at the meetings, every shareholder is treated exactly the same. More and more Bs will naturally be created as WEB and others continue conversions for philanthropy and larger estates are settled.

"What are the chances we ever(10 - 20 years) have one class of shares?"

Ravi Nagarajan has calculated the economic interest and voting interest of A-shares in total, as well as the A-shares owned by Buffett and the A-shares owned by the Berkshire board (including Buffett) back to 1996 when the B-shares were first issued.

https://rationalwalk.com/berkshires-future-depends...

The economic interest of A-shares has decreased considerably, but because the A-shares have 1500 times the economic interest of B-shares but 10,000 times the voting interest, the voting interest of the A-shares has changed little.

See Ravi's article for historical graphs.

There is a risk that A shares and voting rights will increasingly end up in the hands of institutions. Not many long-term oriented retail investors can buy A shares at over half a million dollars each. The trend will accelerate as the estates of Buffett, Munger and other aging shareholders liquidate their A shares.

Some of these institutions may seek short term gains from breaking up the company or disrupting excess cash etc. Others may be activists group seeking to promote ESG or other causes and may not be seeking to maximize their financial returns.

I wonder if this motivating Buffett to pay higher premiums for repurchases of A shares over B shares. A few years ago Buffett stated that a premium of more than 1% for A shares was not justified. Yet he is now willing to pay a premium of 3% and more for A shares. Could it be that he is getting wise to the risk of concentration of A shares and voting rights in the hands of institutions not interested in the best long term economic outcome for the company?

What are the chances we ever(10 - 20 years) have one class of shares ?


I don't know the answer to that, and no real basis for speculation beyond a gut feel of "probably not soon, if ever".


But as a related note, I like the way that a few companies have dealt with this issue.
The founders give themselves super-voting shares, but the super-voting power automatically disappears at some predetermined future date or event.
e.g., Alimentation Couche-Tard was set up so that (IIRC) the 10:1 super-voting class converted to common class as soon as the youngest of the still-living founders was age 65+, something like that.

The French tried to find a solution to get power into the hands of the committed shareholders rather than the short termers (brutal Anglo-Saxons no doubt), but managed to get it precisely backwards. Their solution: shareholders who have held their shares for a long time automatically get double voting rights.
This looks good on the surface, until you realize that it's only backwards looking, and serves only to preserve the power of the current old guard.
It should have been set up to give double voting rights to any shares that the owner pledges not to sell for the next five years. An excellent test to weed out control by transient owners.


The other point raised is that it's a shame that even the price of a single A share is now out of the reach of many people who would in fact make good quality long term shareholders.
That would easily be fixed by a small split in the A shares.
A price in the $50-100k range considered sufficient to keep out the short term riffraff a few years back, so a 5:1 or 10:1 split of A shares would not be an unreasonable move.
And, unlike most splits, it would not be for a meaningless reason.
You could even come up with a rule of thumb: do a 2:1 split any time the share price gets higher than three times the cost of the average car.

Jim

"riffraff" I like that phraseology. Is that what Warren thinks of us?

I don't expect any split while Warren is still alive. After that, maybe a 10:1 or 20:1 split within the next 5-10 years. Although by then the A shares would be around $1,000,000 each, so maybe a 50:1 split?

"riffraff" I like that phraseology. Is that what Warren thinks of us?

Well, maybe we're not riffraff. Maybe he thinks of as merely as "those not currently thought of as honoured guests at the head table."

Some of us are admittedly short-termers with some or all of our positions, which is probably a pretty low categorization in his view.

Jim

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