Trading volume of Class B stock will rise, meeting a benchmark criteria
Berkshire Hathaway Inc.'s decision to split its Class B shares could put the company in the benchmark S&P 500 Index, spurring a big round of buying by index funds, analysts said Tuesday.
Berkshire said its board approved a 50-for-1 split of its Class B common stock (BRK.B 3,320, +54.84, +1.68%) to help smaller investors handle the company's $44 billion acquisition of Burlington Northern Santa Fe Corp. (BNI 97.60, +21.53, +28.30%)
Berkshire Chairman Warren Buffett is notorious for his aversion to stock splits, saying such moves have no real impact and are more like slicing a pizza into smaller pieces. The company's Class A shares (BRK.A 100,195, +1,445.00, +1.46%) have never been split and currently trade above $100,000 each.
However, Berkshire created smaller Class B shares -- sometimes known as Baby Berkshire stock -- to keep investment firms away from smaller investors who wanted a piece of the action, but didn't have $100,000 to put to work. That stock is worth roughly one-thirtieth of the Class A shares.
When the latest split happens, the Class B shares will be even smaller. The Class B shares currently trade at $3,324. After the split, the price will drop to roughly $66. That will make the shares more accessible to smaller investors and will increase trading volume....MORE