Why Warren Buffett Says Berkshire Hathaway Will Never Split Its Shares

Class A shares of Warren Buffett’s Berkshire Hathaway closed above $500,000 a share on Wednesday, marking a new high for the stock.

It marked the first time the shares ever closed above half a million dollars, helping push the company’s market cap above $730 billion. It is now the No. 6 most valuable company in the US

Berkshire Hathaway’s class A stock has long been one of the most expensive single stocks investors could buy, and as a result, investors have repeatedly asked Buffett about a possible stock split, in which a company splits its shares to lower their price and increase their share price. increase the total number of available shares.

In response, Berkshire introduced cheaper Class B stock in 1996, priced at a significantly more affordable $341 as of Thursday afternoon, but has consistently refused to split the company’s original Class A offering.

It’s because of this refusal, not in spite of, that the company has had such a strong track record of growing its value, Buffett argued.

At Berkshire Hathaway’s 1995 annual shareholder meeting, Buffett acknowledged that having such an expensive stock — at the time it was trading about $25,000 a share — could be “from inconvenient to disadvantageous” for investors, especially when it comes to the gift of shares. But he said the barrier to entry was intentional.

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“We want to attract shareholders who are as investment-oriented as we can get, with such a long-term horizon,” he said. If Berkshire split the stock and lowered the price, “we would have a shareholder base that wouldn’t have the level of sophistication and synchronization of objectives with us that we have now.”

There are just over 615,000 Class A shares outstanding, compared to approximately 1.3 billion Class B shares outstanding.

Buffett added that he saw no incentive in having a cheaper stock with more volatility if it doesn’t create “intrinsic value” for investors. “There are a lot of people who are attracted to stocks that are going up. It doesn’t appeal to us,” he said. “We don’t care if it sells higher unless the NAV goes up.”

In 2011, Buffett’s right-hand man Charlie Munger said Buffett had a joke he liked to repeat to his elderly friends: “May you live until the A-shares split.”

There have been a number of high-profile stock splits in recent years, with Amazon and Google parent Alphabet both announcing 20-for-1 splits of their shares once they hit $3,000 each earlier this year. Those announcements followed Apple and Tesla, which both split their shares in 2020 as their valuations skyrocketed.

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