Greetings, aspiring investor! Are you curious about the legendary company led by the Oracle of Omaha, Warren Buffett? The stock price of Berkshire Hathaway is famously high, which leads many people to wonder about its stock split history. Well, you've come to the right place. Let's delve into the fascinating story of Berkshire Hathaway's stock and its unique approach to stock splits.
Step 1: Understanding the Two Classes of Stock
First things first, did you know that Berkshire Hathaway has two distinct classes of stock? You can't just talk about "Berkshire Hathaway stock" without specifying which one you mean! There are the Class A shares (BRK.A) and the Class B shares (BRK.B). These two classes are fundamentally different in their price, voting rights, and, most importantly for our topic, their history with stock splits.
Class A (BRK.A): This is the original stock, known for its incredibly high price. It's the one that often makes headlines for reaching astonishing values, and for good reason!
Class B (BRK.B): These shares were created to make the stock more accessible to a wider range of investors. They trade at a fraction of the price of the Class A shares.
Now that we have that sorted, let's explore the stock split history for each.
Step 2: The Unsplit Legend: Class A Shares (BRK.A)
For those of you wondering about the Class A shares, the answer is a simple and emphatic: Zero.
That's right, Berkshire Hathaway's Class A stock has never been split.
This is a deliberate and well-known part of Warren Buffett's investment philosophy. He believes that the high share price helps to attract a certain type of investor: someone who is serious about long-term investing and isn't looking for short-term gains or quick trading. The high price tag acts as a filter, discouraging speculators and day traders. It aligns with Buffett's "buy and hold forever" mentality, encouraging investors to think like business owners rather than stock traders.
Buffett's Philosophy: He has consistently argued that a high share price encourages a long-term, buy-and-hold mindset among shareholders. He doesn't want shareholders who are focused on price fluctuations, but rather on the intrinsic value and long-term growth of the company.
The Value Remains: A stock split doesn't change the underlying value of a company. It's like cutting a pizza into more slices. You have more slices, but you still have the same amount of pizza. Buffett has always focused on the value of the "pizza" (the company's assets and earnings), not the number of "slices" (shares).
Step 3: The Accessible Option: Class B Shares (BRK.B)
This is where the story gets more interesting. While the Class A shares have remained untouchable, the Class B shares have split once.
This single split was a monumental event in the company's history.
The Split Date: The split occurred on January 21, 2010.
The Split Ratio: It was a 50-for-1 stock split. This means that for every one share of Class B stock an investor owned, they received 50 new shares.
Step 4: Why the Class B Split Happened
So, if Buffett is so against stock splits, why did he allow one for the Class B shares? The reason is tied to a major acquisition.
The Burlington Northern Santa Fe (BNSF) Acquisition: In 2010, Berkshire Hathaway acquired the railroad giant BNSF. The deal involved a mix of cash and Berkshire stock. To make the deal more palatable for BNSF shareholders, a lower-priced Berkshire stock was needed.
Improving Accessibility and Liquidity: The split made the Class B shares significantly more affordable, which was crucial for the BNSF deal and also for individual investors. Before the split, the Class B shares were trading around $3,500 per share. After the split, the price dropped to around $72.72, making it much more accessible. This increased liquidity and made it easier for people to buy and sell the stock.
A Strategic Move, Not a Change in Philosophy: It's important to see this split not as a change in Buffett's core philosophy but as a pragmatic move to facilitate a massive acquisition while also providing a more accessible entry point for smaller investors. He still maintains that the Class A shares, the "Cadillac" of the stock, should remain unsplit to preserve their unique character.
Step 5: Looking Ahead: Will There Be Another Split?
This is the million-dollar question, or rather, the multi-hundred-thousand-dollar question.
For Class A (BRK.A): Based on Warren Buffett's decades-long stance, it is highly unlikely that the Class A shares will ever split. The price continues to climb, and Buffett has consistently maintained his position that he wants to attract investors with a long-term mindset. It's a key part of the company's identity.
For Class B (BRK.B): While not out of the question, another split is not a regular occurrence for Berkshire Hathaway. The 2010 split was a specific event tied to a major acquisition. While the Class B shares have risen significantly in price since then, there is no current indication that another split is on the horizon. The advent of fractional share investing has also made it easier for investors to buy a portion of even expensive stocks, which reduces the need for traditional splits to improve accessibility.
Related FAQ
How to check the current price of Berkshire Hathaway stock?
You can check the current price of both BRK.A and BRK.B on any major financial news website or stock trading platform by searching for their ticker symbols.
How to buy Berkshire Hathaway stock?
You can buy Berkshire Hathaway stock through a brokerage account. Given the high price of BRK.A, most retail investors opt for the more affordable BRK.B shares. Many brokerages also offer fractional shares, allowing you to buy a portion of a BRK.A share.
How to calculate the value of my BRK.B shares after the split?
If you owned 1 BRK.B share before the 2010 split, you would have 50 shares after the split. Your total investment value would remain the same, as the price per share would have dropped by a factor of 50.
How to convert Class A shares to Class B shares?
Class A shares are convertible into Class B shares at any time, with one BRK.A share converting into 1,500 BRK.B shares. This conversion is a one-way street; you cannot convert Class B shares into Class A shares.
How to understand why Berkshire Hathaway stock is so expensive?
The primary reason is that the Class A shares have never split, allowing the price to grow with the company's value over decades. The company's exceptional performance and Warren Buffett's reputation have fueled this growth.
How to know if a stock split is good for investors?
A stock split is generally seen as a neutral event in terms of a company's fundamental value. However, it can be seen as positive for investors as it can increase liquidity, make shares more accessible to a broader audience, and sometimes lead to a short-term price rally due to increased demand.
How to determine the ratio between Class A and Class B shares?
Currently, one Class A share is equivalent to 1,500 Class B shares in terms of value.
How to find a company's stock split history?
You can find a company's stock split history on financial websites like Yahoo Finance, Google Finance, or on dedicated stock split tracking platforms.
How to differentiate between a stock split and a reverse stock split?
A regular stock split increases the number of shares and decreases the price per share. A reverse stock split does the opposite: it decreases the number of shares and increases the price per share, often done by struggling companies to boost their share price.
How to learn more about Warren Buffett's investment philosophy?
You can read his annual letters to shareholders, which are publicly available on the Berkshire Hathaway website. These letters are a treasure trove of wisdom and provide incredible insights into his thinking.