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(Berkshire has 6 million shares of SNOW, so it is relevant.)

Snow is down 18% today. The CEO is stepping down.

This is one I never understood. And not that I think it is bad, I just didn't get why this particular one versus some of the other cyber-security companies.

Per CNBC wrt Frank Slootman:

“Snowflake marked his biggest financial windfall. He controlled roughly 6% of the company's stock at the time of the IPO, and owned 10.6 million shares as of Feb. 9, a stake that's currently worth about $2 billion.

Additionally, Slootman's total compensation in 2023 amounted to $23.7 million, almost entirely from stock and option awards.”

No real comment on Snowflake but I recall the high profile IPO in 2020. Warren & Charlie have really spoiled us and treated us as respected limited partners with their paltry $100K annual comp for 40+years compared to the typical CEO with their extra friendly board and adoring comp. consultants who love to keep the boss happy with expensive options. Chris Bloomstran has mentioned the majority of most buybacks in S&P 500 cos. essentially serve to try to make up for all of the dilution from stock options granted.

WEBspired: "Warren & Charlie have really spoiled us and treated us as respected limited partners with their paltry $100K annual comp for 40+years compared to the typical CEO with their extra friendly board and adoring comp. consultants who love to keep the boss happy with expensive options. Chris Bloomstran has mentioned the majority of most buybacks in S&P 500 cos. essentially serve to try to make up for all of the dilution from stock options granted."

Yes indeed! From 1978 to 2021, CEO pay grew by 1,460%, far outstripping S&P stock market growth (1,063%). In contrast, compensation of the typical worker grew by just 18.1% from 1978 to 2021.

Bloomstran had this to say in last years Semper Augustus annual report, "At least 40% of S&P 500 aggregate net income over the last two decades has not been used for outside shareholder benefit,
but instead was paid to management. Makes 2 and 20 look like a discount. There is a better word than pirates, but this is a G-rated letter.
With such a large percentage of the income of the S&P500 going into the pockets of management, that much less is left for us shareholders in the way of dividends,
buybacks and investing in growing the businesses. Which will (theoretically at least) result in lower returns going forward."

Todays buyer of the S&P500 is getting an earnings yield of 3.61%, 40% of which is going into the pocket of management.

I think Disney Heiress Abigail Disney summed it up best, "If your CEO's salary is 500, 600, 700 times your median workers' pay, there is nobody on Earth, Jesus Christ himself isn't worth 500 times his median workers' pay."

Bloomstran had this to say in last years Semper Augustus annual report, "At least 40% of S&P 500 aggregate net income over the last two decades has not been used for outside shareholder benefit, but instead was paid to management. ...
Todays buyer of the S&P500 is getting an earnings yield of 3.61%, 40% of which is going into the pocket of management.

I'm sure that this effect is going on, and do not argue that it's egregious, but I would love to see how that was calculated. The figure seems a tad extreme even to me, at first glance. Are the managers really paid (say) over $700 billion a year?

Jim

Jim: "I'm sure that this effect is going on, and do not argue that it's egregious, but I would love to see how that was calculated. The figure seems a tad extreme even to me, at first glance. Are the managers really paid (say) over $700 billion a year?"

I would love to see how it was calculated as well.

He did go on to say this...

"One final comment on the record share repurchases in 2022.
A trillion dollars in shares repurchased bought 2.8% of the S&P 500's $36 trillion average market capitalization during the year. However, shares outstanding shrank by only 1.1%.
What happened to the remaining 1.7%? That's the dilution that comes with CFOs telling investors to ignore share-based compensation because it's not a cash expense."

John Bogle said this in his book, The Battle for the Soul of Capitalism,
"What began two centuries ago as owners' capitalism—in which our corporations were run for the benefit of their owners—has transmogrified into managers' capitalism,
in which our corporations are being run for the benefit of their managers.
As I hope we all know, the value of a corporation is nothing more, nor anything less, than the discounted value of its future cash flow.
The compensation has gotten totally out of hand, ridiculously out of hand. It's basically robbing the shareholders of these corporations of the money that's really rightfully theirs.
That's a system that has to change. Corporations should be managed for the shareholders and not for the managers or the insiders.
I believe cost is the single most important factor in investing."

"" Todays buyer of the S&P500 is getting an earnings yield of 3.61%, 40% of which is going into the pocket of management."" Which is why I went way over weight brk 20 years ago. Brk would have been a major home run If,IF, a public company with zero option grants , would have been a big buyer at , material discounts to Iv, oh well. I'm shocked Chris wasn't all over this concept 20 years ago.

Today SNOW is trading at $189.15, or 6.6% below Berkshire's cost basis.

The cost basis of snow is $120.00

Yeah, calguy has it right - Berkshire (Todd Combs, a Snowflake fan at GEICO) bought SNOW at the IPO price ($120/sh)

Berkshire (Todd Combs) purchased 2.09 million shares in the IPO at a price of $120/share, or $250.8 million, on Sept 16, 2020, plus an additional 4.04 million shares in a private transaction from former Snowflake CEO Robert Muglia at the opening price on the day of the IPO of $245/share, or $989.8 million. In total Berkshire owns 6.125 million shares of SNOW with a cost basis of $1,240.6 million, or $202.55/share.

Oh wow - good catch. When I read that the additional 4.04 million shares where purchased at "the debut price" I just assumed that meant the IPO price. Debut = IPO in my mind. But I guess that was a side deal so Muglia could get the opening pop.

Thanks for straightening that out

great catch

I don't know, I looked up the filing and I still think the language suggests $120 / share:

"In addition, Berkshire Hathaway Inc. has agreed to purchase 4,042,043 shares of our Class A common stock from one of our stockholders in a secondary transaction at a price per share equal to the initial public offering price that will close immediately subsequent to the closing of this offering."

I don't know, I looked up the filing and I still think the language suggests $120 / share:

"In addition, Berkshire Hathaway Inc. has agreed to purchase 4,042,043 shares of our Class A common stock from one of our stockholders in a secondary transaction at a price per share equal to the initial public offering price that will close immediately subsequent to the closing of this offering."

This is confirmed in the Columbia Insurance NAIC filings which show a total actual cost of $735,045,120 for a total of 6,125,376 shares.

"This is confirmed in the Columbia Insurance NAIC filings which show a total actual cost of $735,045,120 for a total of 6,125,376 shares."

Thanks. This would be the best source. Would you mind posting a link?

https://freeimage.host/i/JMWMYF9

Thank you for the link, nola. I hope everything is fine in the Big Easy.

Thank you for the link, nola. I hope everything is fine in the Big Easy.

Is this Dan? Yes! Everything is fine down here! Not better than fine but just fine

Yes, this is Dan. I'm glad things are fine with you. I'm doing OK, too.

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