Warren Buffett recently announced that the Class B shares of Berkshire Hathaway are going through a 50 to 1 stock split, which is the first time he has split Berkshire stock – something he has claimed for years he wouldn’t do.
Buffett has stated multiple times that he prefers not to split stocks because the higher prices make it less likely that day traders will cause major price fluctuations. He changed his mind this week though, after Berkshire’s acquisition railroad company Burlington Northern Santa Fe for a mix of cash and stock.
Splitting the stock was a byproduct of the deal and was done for tax reasons.
What is a Stock Split, Exactly?
A stock split is just what it sounds like – the stock is split into multiple parts. It actually doesn’t change the overall value of the stock, just the number of shares.
For example, if you have a $100 stock and the company does a 2 to 1 stock split, then the original share is now two shares valued at $50 each, which still equals $100.
Berkshire B shares price at the time of the stock split: BRK.B stock was listed at $3,425 (Friday’s closing price) being split into 50 shares, valued at $68.50 each. (As an interesting note, the Class A share of Berkshire traded for over $100,000 at the time the Berkshire B shares split).
The split didn’t change the overall value of the shares. But it did make it much easier for the average investor to purchase shares of the Berkshire B stock, as not everyone can easily come up with $3,400 to purchase one share. The resulting Berkshire B share price of less than $100 makes it easier for the average investor to purchase shares.*
Note: These were the prices at the time of the split, which occurred in November, 2009.
*Partial share investing. Some online brokers, including Ally Invest and a few others, offer investors the opportunity to purchase partial shares of stock, so in the case of BRKB, one could have already been making purchases of partial shares before the stock split. However, not all brokerages offer this.
Getting Started Investing
If you’re considering investing, but you don’t know where to start, and you’re worried about all of the decisions. Thanks to the Internet, there are plenty of ways that you can start an investment portfolio, even if you no experience in the investment world.
Thanks to different sites and programs available, it’s never been easier to invest your money.
There are sites like Betterment that will handle all of the investing for you. Betterment has robo-advisors that will invest your money based on your financial goals. As you make money, Betterment will continue to invest the money that you earn and they will change your investment diversity as you get closer to your goals.
Investing is one of the best ways to ensure that your financial future is secure. I know that starting an investment portfolio can be a scary task. Most people don’t understand all of the terms and jargon but don’t let that stop you from investing your hard earned money.
If you have any questions about investing or half shares, please feel free to continue poking around my site or contact me. I would love to answer those questions for you and ensure that you have all of the information that you need.