Will Berkshire Hathaway Stock Split?

Berkshire Hathaway Class A (NYSE:BRK.A) shares are far and away the most expensive shares in the American stock market. Each Class A share of Warren Buffett’s conglomerate currently trades at over $705,000.

By now, the vast majority of companies would’ve gone through many stock splits to keep their shares affordably priced for retail investors. Berkshire, however, has always resisted this urge.

Will Berkshire ever split its stock, or will the company just continue to let its shares rise toward the 7-figure mark and beyond?

What Has Warren Buffett Said About Splitting BRK.A Shares?

Buffett has made his position on a stock split at Berkshire very clear over the years and has stuck to it almost religiously. In Buffett’s opinion, the high price of Berkshire’s A shares helps the company attract the kind of investors it ultimately prefers. People who are willing to buy and hold a stock for a very long period of time as it compounds are less likely to be scared away by high share prices.

At this point, it seems unlikely that Buffett would change his mind about splitting Berkshire’s shares. Although the company’s shares trade at higher prices today than at any point in the past, they’ve long since passed the point at which the argument for making shares more affordable would have held water.

Even if Buffett were to allow a 50-for-1 split today, each Class A share of Berkshire would still trade at well over $14,000. In other words, it would take a stock split of heroic proportions to actually make Class A shares affordable to the average retail investor.

Furthermore, the usefulness of splitting the Class A shares would be minimal, since there’s already a much more affordable Class B option that lacks the voting rights associated with the A shares. These shares trade at about $470, a price at which investors with less capital can access them much more easily.

As long as the Class B shares remain somewhat reasonably priced, there doesn’t seem to be a particularly strong reason for Buffett to change his mind about splitting the Class A shares.

A final reason that Buffett would likely continue to resist a stock split is the fact that splits often drive share prices up artificially as more investors pile into the more affordable shares. Though increasing the number of available shares doesn’t affect the underlying value of the company, it can cause volatility in share prices.

Given Buffett’s decision not to buy any more shares back in Q3, it seems he already believes Berkshire to be at or even above its fair value. As the world’s leading proponent of value investing, therefore, it seems unlikely that he would do anything that would cause shares in his own company to potentially become overvalued and reduce his ability to buy them back at attractive prices in the future.

Could Berkshire Split After Buffett?

Based on history and Buffett’s own opinions about stock splits, it seems extremely unlikely that Berkshire would go through a split while the Oracle of Omaha is still alive and at the helm. At 94 years old, though, Buffett’s time at the head of Berkshire Hathaway is nearing its end. As such, it’s worth looking at whether his successors might decide to eschew Buffett’s preference for avoiding splits.

Here, it’s useful to start with an understanding of Buffett’s relationship with his two closest investing lieutenants, Todd Combs and Ted Weschler. Each of these two investors has his own funds under management within Berkshire, allowing them both to make investment decisions independently of Buffett.

Indeed, Buffett has famously said that he places no personal restrictions on what Combs and Weschler buy and that he often doesn’t know what decisions they make until he sees their portfolio sheets the following month.

The point of this is that Berkshire has cultivated two successors to Buffett who are allowed and even encouraged to think about investing from a different angle than their legendary superior. As a result, it’s far from unlikely that the company could do things under their supervision that Buffett won’t while he’s still on the scene.

One such change that Buffett himself has acknowledged will eventually happen is Berkshire paying a dividend. While he himself is unlikely to move in that direction during his lifetime, there’s every reason to believe that the company will eventually begin distributing cash through dividends under future generations of management.

With that said, a stock split still seems unlikely. Although Combs and Weschler may bring different perspectives to Berkshire, the core principles of value investing that have powered Buffett’s success are almost certain to keep guiding the company. From this point of view, stock splits have little to no utility other than inviting volatility.

Will Berkshire Hathaway Stock Split?

Right now, there doesn’t seem to be any particularly good reason to expect Berkshire Hathaway to split its shares. Buffett could still be running the company for a few more years, and his immediate successors likely wouldn’t feel any substantial pressure to split the stock when they take over. The availability of much more affordable Class B shares will likely act as a pressure valve and keep management from needing to split the Class A shares for quite some time.

With that said, there may someday come a point at which simple math dictates that Berkshire will need to look at a split. If, for instance, the company’s share doubled again, they’d be worth over $1.4 million. One more doubling would drive prices to $2.8 million, and so on. If Berkshire keeps compounding over several more decades, it seems reasonable to suppose that management would eventually have to look at splitting the Class A shares.

That point, though, is likely many years in the future and there’s no especially good way to tell when Berkshire would feel compelled to split. For the moment, investors likely shouldn’t hold their breath on a stock split to make BRK.A shares more affordable.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.