Berkshire Hathaway ‘A’ and ‘B’ shares
A new release by Berkshire Hathaway dated 10 July 2017 said that chairman Warren Buffett that day converted 12,500 of his Class A shares into 18,750,000 Class B shares.
“Of these Class B shares, 18,628,189 have been donated to five foundations: Bill & Melinda Gates Foundation, Susan Thompson Buffett Foundation, Sherwood Foundation, Howard G.
Buffett Foundation and NoVo Foundation. These shares have a current value of $3.17 billion.”
The new release said that Mr Buffett had never sold any shares of Berkshire. “With the current gift, however, more than
40% of his 2006 holdings have been given to the five foundations. Their value at the time of the gifts, including the 2017 gift, totals $27.54 billion.”
“Mr Buffett intends to have all of his Berkshire shares given to philanthropy through annual gifts that will be completed ten years after his estate is settled. In all cases, his A shares will be
converted into B shares immediately prior to the gift. ”
This post seeks to explain the difference between Berkshire A and B shares. For this, Buffettpedia refers to a post dated 5 December 2014 in which it was said: Berkshire Hathaway chairman Warren Buffett said in a memo dated February 2, 1999 (updated on July 3, 2003 and on January 20, 2010) that Berkshire Hathaway Inc has two classes of common stock designated Class A and Class B.
The memo made it clear on the differences between the two classes of shares. “A share of Class B common stock has the rights of 1/1,500th of a share of Class A common stock except that a Class B share has 1/10,000th of the voting rights of a Class A share (rather than 1/1,500th of the vote).”
Another point to note in the memo was the “convertible” aspect: “Each share of a Class A common stock is convertible at any time, at the holder’s option, into 1,500 shares of Class B common stock. This conversion privilege does not extend in the opposite direction. That is, holders of Class B shares are not able to convert them into Class A shares.”
“Both Class A & B shareholders are entitled to attend the Berkshire Hathaway Annual Meeting which is held the first Saturday in May,” said the memo.