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 per 1 A share given the A share closing price of $75,600 and the B share closing price of $2,360.
There are many theories floating around regarding why this strange anomaly could exist. After all, any A shareholder could convert each share they own into 32 Bs and end up with a much higher economic interest (albeit with less voting control). Most ordinary investors (and even some institutions) would logically not place a high premium on voting power considering the fact that it would be very difficult to exert influence given Warren Buffett’s ownership and large following of loyal shareholders.
If enough A shareholders sell their shares and simultaneously purchase Bs, one would think that the selling pressure would reduce the price of A shares and increase the price of B shares enough to eliminate the arbitrage opportunity. Why is this not happening?
A participant on a message board that I frequently read pointed out an interesting set of observations posted on the Motley Fool. I found his theory interesting because it could indicate higher than normal buying demand for the As by someone who cares enough about the higher voting power to pay a significant premium. Who might care so much about voting control to, in effect, pay a 6% premium? Could this be a signal that Berkshire is buying back stock? I suspect we will know the answer on Saturday when the annual report is released. Stay tuned.