Comments on: Berkshire B 50-1 Stock Split http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/ Money Management, Small Business, Career Fri, 19 Mar 2010 22:04:10 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: fredct http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-21325 fredct Wed, 20 Jan 2010 19:23:39 +0000 http://cashmoneylife.com/?p=1937#comment-21325 Yes, but each share will be worth 1/50th as much. Its like taking your piece of pizza and cutting it into 50 tiny slices. You still have the same amount of pizza, just in more pieces. Yes, but each share will be worth 1/50th as much. Its like taking your piece of pizza and cutting it into 50 tiny slices. You still have the same amount of pizza, just in more pieces.

]]> By: matthew http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-21324 matthew Wed, 20 Jan 2010 19:22:34 +0000 http://cashmoneylife.com/?p=1937#comment-21324 i bought 1 share of Berkshire Hathaway - B share today. There will be a stock split 50:1. So would i get 50 share by tommorrow for the one share i bought today? i appreciate if somebody answers i bought 1 share of Berkshire Hathaway – B share today. There will be a stock split 50:1. So would i get 50 share by tommorrow for the one share i bought today? i appreciate if somebody answers

]]> By: Million Dollar Journey http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-20351 Million Dollar Journey Wed, 11 Nov 2009 12:11:01 +0000 http://cashmoneylife.com/?p=1937#comment-20351 Hey Ryan, long time no talk! Thank you for the link! Hey Ryan, long time no talk! Thank you for the link!

]]> By: fredct http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-20338 fredct Mon, 09 Nov 2009 22:53:43 +0000 http://cashmoneylife.com/?p=1937#comment-20338 Oy. Stock splits don't change the value of a company. It decreases the earnings by the same amount of the split per share, so each share is indeed worth 1/x the amount of the old shares. Sometimes there is a small irrational jump after a split due to increased interest, but the magnitude you're suggesting would be ridiculous. It's especially unlikely due to the A/B structure of BRK shares. Any A share can be converted to 30 B shares (to be 1500) upon request, so it provides a convenient method for arbitrage. So if the B shares jumped irrationally, all the A share holders would convert their shares to make the free bucks, flooding the market with B-shares and driving the price down. So unless you expect the irrational behavior to be *so* strong that it pushes the value of A shares to $150K+, I wouldn't bet on B-shares reaching $100. Oy.

Stock splits don’t change the value of a company. It decreases the earnings by the same amount of the split per share, so each share is indeed worth 1/x the amount of the old shares.

Sometimes there is a small irrational jump after a split due to increased interest, but the magnitude you’re suggesting would be ridiculous.

It’s especially unlikely due to the A/B structure of BRK shares. Any A share can be converted to 30 B shares (to be 1500) upon request, so it provides a convenient method for arbitrage. So if the B shares jumped irrationally, all the A share holders would convert their shares to make the free bucks, flooding the market with B-shares and driving the price down.

So unless you expect the irrational behavior to be *so* strong that it pushes the value of A shares to $150K+, I wouldn’t bet on B-shares reaching $100.

]]> By: Jim http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-20336 Jim Mon, 09 Nov 2009 21:10:51 +0000 http://cashmoneylife.com/?p=1937#comment-20336 This will make shares more trdble and my bet is you will see $100 shares shortly after the split. I am a buyer in antcipation of the split This will make shares more trdble and my bet is you will see $100 shares shortly after the split. I am a buyer in antcipation of the split

]]> By: fredct http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-20329 fredct Mon, 09 Nov 2009 14:24:55 +0000 http://cashmoneylife.com/?p=1937#comment-20329 Ah, that makes sense. If you're involved in a deal like that, anything that can't be made even through the deal is just cashed out. i.e. if the company is doing a 10 shares for 1 share purchase, and you have 25 shares, you'll get 2 of the new company and the other 5 shares you get cash for. This can lead to capital gains that you have to recognize and can also be a major PITA to keep track of going forward. Still, with BNI trading at almost $100, I'm surprised they split BRK.B as low as they did. Ah, that makes sense.

If you’re involved in a deal like that, anything that can’t be made even through the deal is just cashed out.

i.e. if the company is doing a 10 shares for 1 share purchase, and you have 25 shares, you’ll get 2 of the new company and the other 5 shares you get cash for. This can lead to capital gains that you have to recognize and can also be a major PITA to keep track of going forward.

Still, with BNI trading at almost $100, I’m surprised they split BRK.B as low as they did.

]]> By: Ryan http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-20328 Ryan Mon, 09 Nov 2009 14:06:25 +0000 http://cashmoneylife.com/?p=1937#comment-20328 According to a <a href="http://money.cnn.com/2009/11/06/markets/thebuzz/index.htm?postversion=2009110616" rel="nofollow">CNN article</a> I read it was so smaller shareholders of Burlington Northern Santa Fe wouldn't take as much of a hit when they receive the Berkshire stock. To be honest, I'm not sure how that part of the deal works. The article also references a video interview with Buffett, which I haven't had time to watch. But I think it's interesting that BRK.B is splitting after Buffett has been opposed to it for so long. According to a CNN article I read it was so smaller shareholders of Burlington Northern Santa Fe wouldn’t take as much of a hit when they receive the Berkshire stock. To be honest, I’m not sure how that part of the deal works. The article also references a video interview with Buffett, which I haven’t had time to watch.

But I think it’s interesting that BRK.B is splitting after Buffett has been opposed to it for so long.

]]> By: fredct http://cashmoneylife.com/2009/11/08/berkshire-b-50-1-stock-split/comment-page-1/#comment-20327 fredct Mon, 09 Nov 2009 13:57:48 +0000 http://cashmoneylife.com/?p=1937#comment-20327 Can anyone explained these "tax reasons" that lead to the splitting of the stock? Can anyone explained these “tax reasons” that lead to the splitting of the stock?

]]>