Berkshire in stock split to buy firm
By Josh Funk |
January 18, 2010, Monday
|
Print Edition
Print Edition
WARREN Buffett's Berkshire Hathaway Inc is getting ready to split the company's Class B shares on Thursday as part of its plan to buy Burlington Northern Santa Fe Corp.
The 50-for-1 stock split, which shareholders will vote on Wednesday, will boost the liquidity of Berkshire's stock, and enable the firm to offer even small BNSF shareholders Berkshire stock as part of its US$26.3 billion cash and stock deal.
The added liquidity Berkshire will have as a result of the split will also increase the chances that the Omaha-based company will join the S&P 500 index. Berkshire's Class A shares, which are the nation's most expensive stock, and its Class B shares have been difficult to trade because of their high prices.
Berkshire's Class A shares, which sold for US$97,500 last Friday, are not being split.
Class B shares, dubbed "Baby Berkshires," were first issued in 1996 to meet demand from smaller investors and discourage investment firms from reselling pieces of Berkshire's original shares - which became the Class A shares.
Buffett declined to discuss the stock split last Friday, ahead of Wednesday's special shareholder meeting in Omaha. Berkshire's board has said in documents sent to shareholders that it supports the split regardless of the BNSF deal.
This week's split will make the US$3,247 Class B shares significantly more affordable - they will be worth US$64.94 each. That will take the B shares from 1/30th the value of a Class A share to 1/1,500th of Berkshire's Class A shares.
"Now everybody will have access to it," said Andy Kilpatrick, the stockbroker-author who wrote "Of Permanent Value: The Story of Warren Buffett."
The fact that the split may lead to inclusion in the S&P 500 is also significant because so many investors rely on it as a barometer for the economy. For years, Buffett has measured Berkshire's annual performance against the index in his letter to shareholders.
Being included would also generate new investment in Berkshire because trillions of dollars mirror moves in the index, and many funds buy stock in the companies in it.
A Standard & Poor's committee decides which companies to include in the S&P 500 based on a number of different criteria.
The 50-for-1 stock split, which shareholders will vote on Wednesday, will boost the liquidity of Berkshire's stock, and enable the firm to offer even small BNSF shareholders Berkshire stock as part of its US$26.3 billion cash and stock deal.
The added liquidity Berkshire will have as a result of the split will also increase the chances that the Omaha-based company will join the S&P 500 index. Berkshire's Class A shares, which are the nation's most expensive stock, and its Class B shares have been difficult to trade because of their high prices.
Berkshire's Class A shares, which sold for US$97,500 last Friday, are not being split.
Class B shares, dubbed "Baby Berkshires," were first issued in 1996 to meet demand from smaller investors and discourage investment firms from reselling pieces of Berkshire's original shares - which became the Class A shares.
Buffett declined to discuss the stock split last Friday, ahead of Wednesday's special shareholder meeting in Omaha. Berkshire's board has said in documents sent to shareholders that it supports the split regardless of the BNSF deal.
This week's split will make the US$3,247 Class B shares significantly more affordable - they will be worth US$64.94 each. That will take the B shares from 1/30th the value of a Class A share to 1/1,500th of Berkshire's Class A shares.
"Now everybody will have access to it," said Andy Kilpatrick, the stockbroker-author who wrote "Of Permanent Value: The Story of Warren Buffett."
The fact that the split may lead to inclusion in the S&P 500 is also significant because so many investors rely on it as a barometer for the economy. For years, Buffett has measured Berkshire's annual performance against the index in his letter to shareholders.
Being included would also generate new investment in Berkshire because trillions of dollars mirror moves in the index, and many funds buy stock in the companies in it.
A Standard & Poor's committee decides which companies to include in the S&P 500 based on a number of different criteria.
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