Buffett gambles with stock split

Published: Saturday, January 23, 2010 at 6:01 a.m.
Last Modified: Saturday, January 23, 2010 at 1:04 a.m.

NEW YORK — Warren Buffett better get used to crowd control — at least when it comes to his investors.

His company, Berkshire Hathaway, just opened itself up to the masses after a 50-to-1 split of its Class B shares took the stock price from around $3,500 to $69 each. That means you can buy a share of one of the world's most successful companies for the same price of Salesforce.com or Panera Bread Co.

At a price like that, Berkshire shares will attract more buyers — but not necessarily the kind Buffett likes. Bigger and more aggressive investors could show up on his doorstep, many of whom don't share his long-term views about investing.

"It could be like trying to manage the New York Yankees by what the guys in the bleacher seats are saying," says Jeff Matthews, author of "Pilgrimage to Warren Buffett's Omaha" and founder of the hedge fund Ram Partners LP.

Don't be fooled. Buffett isn't doing this because he wants to give more people a chance at owning Berkshire stock. The stock split is being done as part of Berkshire's $26.3 billion acquisition of Burlington Northern Santa Fe Corp. The new lower-priced shares enable Berkshire to offer shareholders in the nation's second-largest railroad Berkshire stock instead of cash.

Buffett acknowledges he doesn't like having to issue stock. Neither does his right-hand man, vice chairman Charlie Munger.

"Charlie and I like using stock about as much as preparing for a colonoscopy. It's not our favorite activity," Buffett said Wednesd

Reader comments posted to this article may be published in our print edition. All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

▲ Return to Top