How To Buy Berkshire Hathaway Class A Stock
In the 1990s, when shares were priced at a comparatively paltry $30,000 or so, Warren Buffett opted to create a second class of shares rather than do a stock split to create more shares and lower the price of entry to Berkshire Hathaway ownership.
how to buy berkshire hathaway class a stock
Berkshire is the seventh largest component of the S&P 500 index and the top-ranked company in the Forbes Global 2000, which takes into account both market value and fundamental data. The company is one of the largest American-owned private employers in the United States. Its class A shares have the highest per-share price of any public company in the world, reaching $500,000 in March 2022, because Buffett chooses not to split the stock.
Berkshire's class A shares sold for $465,725 as of January 5, 2022, making them the highest-priced shares on the New York Stock Exchange, in part because they have never had a stock split and have only paid a dividend once since Warren Buffett took over, retaining corporate earnings on its balance sheet in a manner that is impermissible for mutual funds. Shares closed over $100,000 for the first time on October 23, 2006. Despite its size, Berkshire had for many years not been included in broad stock market indices such as the S&P 500 due to the lack of liquidity in its shares; however, following a 50-to-1 split of Berkshire's Class B Shares in January 2010, and Berkshire's announcement that it would acquire the Burlington Northern Santa Fe Corporation, parent of BNSF Railway, Berkshire replaced BNSF in the S&P 500 on February 16, 2010.
Generally, the difference between A class shares and B class shares pertain to voting rights. Often the people who control the company have a class of shares with voting rights that outweigh all others. Hershey Co. (NYSE: HSY) is known for creating a new class of shares so that the Hershey Trust could diversify their holdings. The trust forces the company to buy back the A class shares. Likewise, the Ford Motor Company (NYSE: F) also created a class of shares that had weighted voting rights. This is so the family could retain control of the company despite having the shares available on the stock markets.
As for Berkshire Hathaway, (NYSE: BRK), B class shares sell at 1/1,500 of the price of an A class share, which sells for around $175,000 a share. If the B class were to trade higher, A shares are converted to keep the price 1/1,500 of the A class shares. A class shares are convertible to B class shares at any time; however, B class are not convertible to A class shares. While B class shares of Berkshire Hathaway only have 1/10,000 the voting right of A class shares, investors of both classes are invited to the annual meeting. Warren Buffett, the investor behind Berkshire Hathaway, felt that a stock split resulted in more money given to attorneys than to shareholders. Therefore, he has never split Berkshire, which has resulted in such a high per-share price. One of the reasons he created the B class shares was to prevent anyone outside of his control from buying A class shares and selling them for less in a trust.
To find out about the voting rights associated with a company's stock share classes, an excellent resource is its annual report. Let's look at Google, which has two share classes available for purchase--class A common stock (GOOGL) and class C capital stock (GOOG). According to Alphabet's annual report, the A common stock, GOOGL, has one vote per share, while the class C capital stock, GOOG, has no voting rights.
There is also a class B common stock, but you're unlikely to see it in the marketplace because it is owned almost entirely by Google's ruling triumvirate: executive chairman Eric Schmidt; Sergey Brin, co-founder of Google and president of parent company Alphabet; and Larry Page, co-founder of Google and CEO of Alphabet. The B shares are an attempt to ensure the company founders retain majority voting power; according to the most recent annual report, as of Dec. 31, 2016, Schmidt, Brin and Page owned approximately 92.4% of outstanding Class B common stock, which represented approximately 56.8% of the voting power. The annual report goes on to explain that these three executives therefore have "significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets, for the foreseeable future."
At the time of Google's share split on April 2, 2014, shareholders received one class C share (in the form of a stock dividend) for every class A share they owned. Class C shares began trading on April 3 under the original ticker GOOG, while class A shares began to trade as GOOGL. The primary purpose of the stock dividend was to retain voting concentration with class B shareholders. (In particular, employee stock options for nonvoting (class C) shares are nondilutive to Page, Brin, and Schmidt.)
Some investors are just along for the ride, such as investors in the A share class of Snap, which has no voting rights. In Snap's annual report, it is explained that Snap co-founder and CEO Evan Spiegel and co-founder and chief technology officer Robert Murphy together own a such a large concentration of Class C common stock (which is entitled to 10 votes per share) that these two men have approximately 88.5% of the voting power of Snap's outstanding capital stock. The Class A common stock, the one that investors can buy under the ticker SNAP, has no voting rights. 041b061a72