No. of Recommendations: 2
This is the first I have heard about fractional ownership of A shares.
Is it fairly common?
How do they get voted?
Can you sell a fraction of your fraction or does it have to be sold in the same size as the purchase?
If one were to invest in BRK now and had access to fractional ownership and you could sell as much or as little of your fraction as you wanted then it seems you would be getting a bigger bang with the fractional A shares than with whole B shares.
I had a Sharebuilder account I opened around 2003, remember them? The premise was you could put in any amount per month, and they'd use the entirety to buy a particular stock. They'd buy fractional shares with whatever money was left after purchasing whole shares. I don't think they did the program with A shares. When I switched brokers all my fractional shares had to be liquidated and only whole shares could move in kind. Etrade doesn't allow you to buy fractional shares of anything, so I don't think it's a standard offering from all brokers.
What I've read about how they're voted, is it varies by broker from not at all, to an internal system where they poll how all their owners want to vote their fractional portion of the share and then vote the whole shares accordingly. Berkshire itself doesn't recognize the fractional share owners as shareholders - the whole share is held by the Broker.
It's possible to end up with fractional shares even in brokerages who don't allow you buy them. One way is if you need to recharacterize already invested IRA contributions - that's how I ended up with some fractional B shares in Vanguard. Etrade says this about selling fractional shares:
"Selling fractional shares requires a market or limit order that is good for the day, and must include the full decimal quantity owned. Orders for less than one share must be market orders."
An A share can be converted to 1500 B shares by telling your broker that's what you want to do, so it's useful to think of an A share as 1500 B shares, but the A shares have much greater voting power, so they vote like 10,000 B shares. How much is the extra voting power worth? Warren Buffett has said A shares are the better deal as long as they don't trade for more than 2% over the cost of 1500 B shares. As a result of these forces, the A shares tend to trade between parity and a 2% premium to the B shares.
So I'd qualify your thoughts as you'd get a bigger bang with fractional A shares if they're trading for less than 1,530 B shares (2% more than 1500), and your broker allows you to vote the fractional shares.
