Berkshire Hathaway Class A vs. Class B Shares: What's the Difference? (2024)

Berkshire Hathaway Class A vs. Class B Shares: An Overview

Investors interested in buying into Warren Buffett's Berkshire Hathaway have two options: Class A stock (BRK.A) and Class B stock (BRK.B). The two types of shares each provide access to the famous conglomerate, but they have important differences.

The main difference between the two types of shares is their price. On July 17, 2023, the company's Class A shares closed at $523,500 pershare. Compare that to the more affordable Class B shares, which closed at $344.25 on the same day.

Key Takeaways

  • Berkshire Hathaway Class A is the company's original stock offering, known for its stratospheric price per share.
  • Berkshire Hathaway Class B shares, first issued in 1996, are more modestly priced and have a correspondingly modest share of equity value in the company.
  • There can be minor differences between the two in market performance, but the key difference is that Class B is affordable to small investors.

Berkshire History and the Introduction of Class B Shares

Berkshire Hathaway was content with its highly valued, single class of stock. But the market demanded a lower-priced, more common-stock nibble at the Berkshire pie, given that shares were trading for around $30,000 at that time.

So in 1996, chief executive officer (CEO) Warren Buffett and the board responded by issuing 517,500 shares of Class B shares. This allowed anyone interested to invest in the company for 1/30th the price (and equity) of a Class A share of stock. A 50-to-1 stock split in 2010 sent the ratio to 1/1,500th, which means each share of a Class A common stock was convertible at any time to 1,500 shares of Class B common stock.

Class B shares carried correspondingly lower voting rights as well (of the voting rights of a Class A share 1/200th of the per-share voting rights. later changed to 1/10,000th) and Buffett marketed Class B shares as a long-term investment and as an open-ended offering, so as to prevent volatility as a result of supply concerns.

On May 1, 2021, vice chair Charlie Munger unofficially announced that Warren Buffett would be succeeded as CEO by Greg Abel when Buffett eventually steps down. Abel is CEO of Berkshire Hathaway Energy and vice chairman in charge of noninsurance operations.

Why 2 Share Classes?

The main reason why Class B shares were introduced was to allow investors to purchase the stock directly instead of buying a sliver of a share through unit trusts or mutual funds that mirror Berkshire Hathaway's holdings. After all, the majority of individual shareholders just can't afford the sky-high price of a single Class A share. As of July 20, 2023, the stock closed at $526,130.

Buffett explained the action in his 1996 annual letter to shareholders:

"As I have told you before, we made this sale [of Class B] in response to the threatened creation of unit trusts that would have marketed themselves as Berkshire look-alikes. In the process, they would have used our past, and definitely non-repeatable, record to entice naïve small investors and would have charged these innocents high fees and commissions."

If the stock was left in the hands of unit trusts, "Berkshire would have been burdened with both hundreds of thousands of unhappy, indirect owners (trust holders, that is) and a stained reputation."

Key Differences

Buffett insists that the Class A shares will never experience a stock split because he believes the high share price attracts like-minded investors, those focused on long-term profits rather than on short-term price fluctuations.

Along with being more accessible to retail investors, Class B shares offer the benefit of flexibility. If an investor owns just one share of Class A and is in need of some cash, the only option is to sell that single share, even if its price far exceeds the amount of money they need to access.

In contrast, a holder of Class B shares can liquidate part of their Berkshire Hathaway holdings just up to the amount needed to meet cash flow requirements. Class B also provides apotential tax benefit: The much lower price means that Class B stock can be passed to heirs without triggering the gift tax the way passing Class A shares does.

One final difference is that Class A shares can be converted into an equivalent amount of Class B shares any time a Class A shareholder wishes to do so. The conversion privilege does not exist in reverse. Class B shareholders can only convert their holdings to Class A by selling their Class B shares and then buying the equivalent in Class A.

Advantages and Disadvantages of Berkshire Hathaway Class A and Class B Shares

Given the astronomical price of Class A shares, most investors do not have much of an option of which type of share to buy if they're interested in Berkshire. For investors who are able to make a decision between investing in a smaller number of Class A shares or a much larger number of Class B shares, there are a few pros and cons of each to keep in mind.

Advantages

Class A shares historically tend to slightly outperform Class B shares, but this is by no means a guaranteed outcome in the future. Keep in mind that this may be due to different pools of investors and market dynamics.

Class A shares also offer the convenience of a long-term investment without much possibility of a stock split down the line.

Investors looking for flexibility or without a great deal of money have the option to invest in Berkshire's Class B shares. As such, someone looking to adjust their stake in Berkshire in a more granular way will likely prefer the dramatically lower price of this stock. With an equivalent investment in Class B shares, an investor has the opportunity to sell off a portion of their holdings in order to generate an artificial dividend or to better balance a portfolio.

Disadvantages

One of the most obvious drawbacks to investing in the company is the price of the Class A share. There really is no way for the average investor to purchase even a single share in the company. Even investing in a mutual fund or exchange-traded fund (ETF) that has Class A shares in its portfolio won't guarantee that you get the equivalent of a single share of this stock.

Because there is more flexibility in Class B shares than Class A shares of Berkshire Hathaway, investors may expect a stock split in the future, thereby diluting their interests in the company.

Pros

  • Class A shares outperform Class B shares

  • Long-term investment option with Class A share

  • Class B shares offer greater flexibility

Cons

  • Costly Class A shares

  • Possible stock splits in Class B shares may dilute ownership

Why Doesn't Berkshire Hathaway Stock Split?

Warren Buffet has stated that he would never split the class-A shares of Berkshire Hathaway, even though they trade at almost $530,000 per share. His reasoning is that he wants to only attract long-term, high-quality buy-and-hold investors (like himself) and to discourage scalpers and day traders. Instead, the Class B shares trade at a more reasonable $345 per share.

Why Do Some Stocks Have 2 Classes (A & B Shares)?

Several companies offer more than one share class to the public. Class A shares will typically grant more voting rights than other classes. This difference is often only pertinent for shareholders who take an active role in the company. Nevertheless, because of the voting rights, A-shares are often more valuable than B shares. Some companies even have three or more share classes, in some special circ*mstances.

Can a Shareholder Convert Berkshire A Shares Into B Shares?

Each share of Class A Common Stock is convertible, at the option of the holder, into 1,500 shares of Class B Common Stock. Shares of Class B Common Stock are not convertible into shares of Class A Common Stock.

How Many Berkshire Hathaway Shares Are There?

There are 1.45 million Berkshire Hathaway Class A (BRK.A) shares outstanding. More than 2.17 billion Class B (BRK.B) shares were outstanding as of July 20, 2023.

The Bottom Line

As CEO, Warren Buffet has helped Berkshire Hathaway become one of the most valuable companies in the world. The company's Class A shares are among the world's most coveted stocks. That's because it comes with great value but also a hefty price tag, which makes it out of reach of the average investor. If you're looking for a way to reap the benefits of investing in the company, consider Berkshire's Class B shares. As with any other investment venture, make sure they align with your goals and investment philosophy.

Berkshire Hathaway Class A vs. Class B Shares: What's the Difference? (2024)

FAQs

Berkshire Hathaway Class A vs. Class B Shares: What's the Difference? ›

What's the difference between Berkshire Hathaway Class A and Class B shares? Aside from the price, the main difference between Berkshire Hathaway Class A shares

Class A shares
In finance, a class A share refers to a share classification of common or preferred stock that typically has enhanced benefits with respect to dividends, asset sales, or voting rights compared to Class B or Class C shares.
https://en.wikipedia.org › wiki › Class_A_share
and Class B shares is that Class A shares can never be split, while Class B shares can.

What is the difference between A and B Berkshire shares? ›

Key Takeaways. Berkshire Hathaway Class A is the company's original stock offering, known for its stratospheric price per share. Berkshire Hathaway Class B shares, first issued in 1996, are more modestly priced and have a correspondingly modest share of equity value in the company.

Is it better to buy Class A or Class B shares? ›

Class A shares generally have more voting power and higher priority for dividends, while Class B shares are common shares with no preferential treatment. Class C shares can refer to shares given to employees or alternate share classes available to public investors, with varying restrictions and voting rights.

Is there a difference between A and B shares? ›

A Shares typically come with full voting and pre-emption rights, whereas B shares do not. Usually, investors will pay over a certain amount to receive the full rights that come with A shares, an average of £1,000 - £4,000, but this is a decision for each company to make for themselves.

Are Class B shares worth anything? ›

Class B mutual fund shares are seen to be a good investment if investors have less cash and a longer time horizon. To avoid the exit fee, an investor should typically remain in the fund for five to eight years.

Is it better to buy Berkshire A or B? ›

Berkshire CEO Warren Buffett has suggested that investors favor the B shares when the A-share premium is above 1% and opt for the Class A stock if the two classes are at parity, as was the case at the start of 2023. Berkshire Hathaway, like many other companies, has two classes of stock outstanding.

Can you convert Berkshire Hathaway A shares to B shares? ›

Berkshire has two classes of common stock designated Class A Common Stock and Class B Common Stock. Each share of Class A Common Stock is convertible, at the option of the holder, into 30 shares of Class B Common Stock.

What is the downside of Class A shares? ›

Disadvantages of Class A Shares

Class A shares are very less in number and often do not interest the general public.

What is the point of Class B shares? ›

Commonly, Class B shares are held by promoters or senior management of a company and carry significantly higher voting rights than Class A shares. It effectively allows firms to raise capital (by selling Class A shares) while retaining control of voting (and retaining Class B shares).

Are Class A and Class B shares worth the same? ›

Class A shares are often considered to be more valuable than Class B shares because they come with more voting rights and are held by individuals who have a significant amount of influence over the company's decisions. This can make Class A shares a more attractive investment option for some investors.

Why buy Berkshire Hathaway B shares? ›

Berkshire Hathaway can be a great lower-risk investment. Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) needs no introduction. The Warren Buffett-managed conglomerate has a stellar track record of growing value for its shareholders. It can make a great long-term investment.

Why invest in BRK A? ›

Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) stock has proven to be one of the best-performing investments of all time. Since 1980, shares have increased more than 2,000 times in value. A $500 investment would now be worth a cool $1 million.

Is Berkshire Hathaway Class A stock a good buy? ›

Is Berkshire Hathaway a buy today? More specifically, investors can check Berkshire's price-to-book ratio, which shows how much they pay for the business's equity. Over the years, Berkshire has traded at roughly 1.4 times its book value. Today, at 1.5 times, it's near the high end of its range over the past decade.

Why invest in Berkshire Hathaway Class B? ›

Instead of around an average of 7,800 shares sold each day for A shares, around 3 million shares are traded on an average day. Combined with the more affordable price and higher trade volume, you have a better shot of buying the Berkshire Hathaway B share.

Top Articles
Financial Cookbook Easy to Understand Definitions - The Financial Cookbook, LLC
Prepare For Spooky Season By Getting Your Finances In Order — Here Are 9 Ways To Make Sure It's Not Too Scary
Devotion Showtimes Near Xscape Theatres Blankenbaker 16
Craftsman M230 Lawn Mower Oil Change
Stadium Seats Near Me
Jefferey Dahmer Autopsy Photos
Top Financial Advisors in the U.S.
Videos De Mexicanas Calientes
Owatc Canvas
Here's how eating according to your blood type could help you keep healthy
41 annonces BMW Z3 occasion - ParuVendu.fr
Smokeland West Warwick
Vardis Olive Garden (Georgioupolis, Kreta) ✈️ inkl. Flug buchen
World Cup Soccer Wiki
Driving Directions To Atlanta
Shooting Games Multiplayer Unblocked
OpenXR support for IL-2 and DCS for Windows Mixed Reality VR headsets
4156303136
Richland Ecampus
Popular Chinese Restaurant in Rome Closing After 37 Years
The BEST Soft and Chewy Sugar Cookie Recipe
Pirates Of The Caribbean 1 123Movies
LCS Saturday: Both Phillies and Astros one game from World Series
Walgreens Bunce Rd
Fleet Farm Brainerd Mn Hours
Boise Craigslist Cars And Trucks - By Owner
Best Middle Schools In Queens Ny
Nk 1399
Danielle Ranslow Obituary
Encore Atlanta Cheer Competition
Ullu Coupon Code
Infinite Campus Asd20
How rich were the McCallisters in 'Home Alone'? Family's income unveiled
Issue Monday, September 23, 2024
Why Are The French So Google Feud Answers
Restaurants Near Calvary Cemetery
Muma Eric Rice San Mateo
The 38 Best Restaurants in Montreal
Andhra Jyothi Telugu News Paper
Giantess Feet Deviantart
How to Draw a Sailboat: 7 Steps (with Pictures) - wikiHow
159R Bus Schedule Pdf
Craigslist Pa Altoona
Gateway Bible Passage Lookup
M Life Insider
2007 Jaguar XK Low Miles for sale - Palm Desert, CA - craigslist
Doublelist Paducah Ky
Panolian Batesville Ms Obituaries 2022
Unblocked Games 6X Snow Rider
Craigslist Monterrey Ca
Obituary Roger Schaefer Update 2020
Supervisor-Managing Your Teams Risk – 3455 questions with correct answers
Latest Posts
Article information

Author: Van Hayes

Last Updated:

Views: 5762

Rating: 4.6 / 5 (66 voted)

Reviews: 81% of readers found this page helpful

Author information

Name: Van Hayes

Birthday: 1994-06-07

Address: 2004 Kling Rapid, New Destiny, MT 64658-2367

Phone: +512425013758

Job: National Farming Director

Hobby: Reading, Polo, Genealogy, amateur radio, Scouting, Stand-up comedy, Cryptography

Introduction: My name is Van Hayes, I am a thankful, friendly, smiling, calm, powerful, fine, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.