Berkshire Hathaway Class B Shares
Jun 24th, 2007 by Martin Lee
Berkshire Annual Letter 1996 (Part 9)
In May 1996, 517,500 shares of Class B Common were sold for the first time. The creation and sales of these shares was a necessity.
Appearing in the market were many unit-trusts that were marketed as Berkshire look-alikes. Using Berkshire’s past reputation, they were trying to lure small and naive investors into investing with them (and earning high commissions and fees in the process).
Once these funds started to buy Berkshire’s shares, the price of Berkshire shares would increase. The price jump would validate the purchase of such funds, and lead to more investors buying them.
This would ultimately cause a bubble in Berkshire shares.
By creating Class B shares, the whole problem was prevented as investors now have a way to invest in Berkshire directly at a low cost. Furthermore, the offering was made open-ended, which prevented any short-term price spurt from scarcity after the IPO.
