Berkshire Hathaway Class B shares used to be only for Fat Cats, yacht-owners, and "I-have-so-much-money-I-don't-know-what-to-do-with-it" types. They were trading at $3,476 each, before each share was split into 50 smaller shares in 2010. This stock split is known as "Baby Berkshire."
Why the split? Berkshire Hathaway Class B shares weren't traded enough to make them part of the S&P 500, i.e. they were too cool for school. Splitting the few, large, expensive shares into more affordable, lil' baby shares brought them into the mainstream, which didn't take long.
Berkshire Hathaway Class B shares were split into 50 baby shares each at the end of January, and joined the popular kids in the S&P 500 in early February.
Why doesn't BRK split so that it's not a gadjillion dollars a share and impossible for Joe Sixpack to buy? Because servicing millions of shareholders is way more expensive than servicing tens of thousands. And the number itself is kind of a victory lap for W-Buff, who opens every annual report with its stock price in the mid 70s as a kind of friendly FU to everyone running laps slower than BRK. Which is pretty much everyone.
Related or Semi-related Video
Finance: What Are Shares Outstanding?268 Views
Finance a la shmoop what are shares outstanding Okay first
things first this is not a qualitative assessment of shares
shares maybe bad awful mediocre good or even outstanding but
that's not what this term refers to it also doesn't
mean that they're you know out standing in the ring
paying dividends in the way that they don't do that
Sorry won't sing again Alright rather shares outstanding is a
technical term that reflects how many pieces make up the
sum total of the ownership pie of a company So
here is what baby's first chainsaw dot com looks like
it has forty million slices and is currently trading for
fifteen bucks a slice while new toddlers were so into
mechanical power tools or how sick and twisted the writers
it's from up Are you been here anyway If you
didn't catch the cleverness here a slice equals a share
so the company has forty million shares outstanding They're trading
at fifteen bucks age and that gives the company a
market value of six hundred million dollars That means that
if someone wanted to buy the entire pie they could
in theory pay six hundred million bucks assuming everyone would
Sell them all their shares for fifteen bucks each and
the shares outstanding Change Sure Bunch of factors change that
number all the time When an employee decides to either
buy out or sell the stock options granted to her
when she joined the company Well those options convert into
shares So if she had ten thousand options and sold
them the company would have then ten thousand fewer options
outstanding We're kind of like a liability but it would
now have forty million ten thousand shares outstanding The options
just converted into shares on men Okay what if the
company wanted to raise thirty million bucks to buy a
small competitors for all cash Well it could sell to
the public two million shares at fifteen bucks a pop
Did it already own those shares Well likely not They
weren't just sitting in the vault in treasury stock so
it had to print those shares out of thin air
to dot and then sell them to new buyers So
add two million to the total and now the company
has forty two million ten thousand shares outstanding It also
has thirty million bucks more in cash on its balance
Sheet by the way now there's a danger in the
increase in shares outstanding It's called share creep and it's
not this guy Rather it refers to the gradual increase
in shares outstanding otherwise known as dilution because now instead
of a six hundred million dollar valuation with forty million
shares at fifteen bucks the company if it were to
still have a six hundred million dollar valuation now it's
more shares outstanding would see its stock price drop teo
six hundred million divided by forty two million ten thousand
and yeah that gets you fourteen dollars in twenty eight
cents a share So in the process of the options
being converted and the cash being raised by selling equity
the company destroyed seventy two cents a share in value
Now in real life the market probably goes up and
makes account for all that What were omitting here is
that the company raised thirty million bucks of cash in
the process Cash that well we investors presume it will
use wisely and not on you know kibble for the 00:03:14.07 --> [endTime] office terrier
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