The ultimate shrewdness is found not in the balance sheet, but in the qualitative excellence of the business.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 0
From the Thanksgiving letter while not immediately it sure sounds as if WEB is going to accelerate his stock sales in order to distribute more money to his kids charitable foundations while they are still at an age where they will decide what to fund. On of the points always raised about buybacks is that it was never really possible to buy stock in size even within a 1 year time period. Well, this is the once in a lifetime opportunity for BRK to purchase a significant amount of shares...much more so than a Dutch auction. Simply come to an agreement with the charitable foundations that when you want to sell we are interested in being the buyer...for example just take the average share price over the last 90 days, etc. With the large amount of cash currently held this would be no-brainer especially if the price is between 1.4 and 1.8X book. Or...do we prefer that the foundations receive the massive amount of B shares and just sell them on the open market?
No. of Recommendations: 20
Or...do we prefer that the foundations receive the massive amount of B shares and just sell them on the open market?
Ummm, yes? Obviously?
Were you expecting a different answer?
Share transfers between individuals don't change the value of a share up or down, whether gifted or at any agreed price. It's irrelevant to the value of a share.
Conversely, company buybacks at valuations which might be above fair value drive the value of a share down.
If you're an ongoing shareholder, which would YOU prefer?
Plainly the rational answer is no buybacks above fair value, ever. Let individual shareholders and prospective shareholders shuffle things among themselves at any price or no price, and pay no attention to it.
Jim
No. of Recommendations: 5
I think it would be best to avoid any off market behind the curtain deals between Buffett family foundations and Berkshire, unless the same deal was also available to other shareholders.
What if BRK shares were to fall soon after the repurchase? There would invariably be insinuations, and probably lawsuits, alleging insider knowledge.
If Berkshire was willing to make large share repurchases which the market could not support, then a reverse Dutch tender auction would be the best and most transparent option.
