Over the past month, I wrote a few posts regarding potential arbitrage opportunities available due to discrepancies between the relative valuations of Berkshire Hathaway’s Class A and Class B shares. The arbitrage opportunity identified in these posts has now been entirely eliminated as a more “normal” relationship between the Class A and Class B shares returned. Read this post to revisit what took place over the past month and the implications for the notion that the market for Berkshire Hathaway shares is “efficient”.
Last month, I wrote about potential opportunities to profit from arbitrage from pricing discrepancies between Berkshire Hathaway Class A and Class B shares. While the arbitrage opportunity was reduced significantly by February 26, it has re-emerged again more recently. Forced selling by charitable foundations may be the cause. Read this post to learn more about this potential arbitrage opportunity.
On Friday, February 20, I wrote about the unusually high discount on Berkshire Hathaway B Class shares relative to A Class shares. It appears that the discount persisted on Monday, February 23 as well but slightly narrowed to just over 32 Bs
Today’s market action has been remarkable in many ways with Berkshire Hathaway trading an extreme range and closing at multi-year lows. I happen to consider Berkshire Hathaway to be severely undervalued and I will have more to say about valuation when the 2008 report comes out next week. In the meantime, it is interesting to make a few observations regarding a remarkable arbitrage situation that persisted for most of the day and a record high closing discount on 30 B shares relative to one A.