Berkshire Hathaway 2017 Annual Meeting Audience Question # 36

Plans for future buy backs of Berkshire A-shares

Warren Buffett:


Gregg Warren:

Warren, plans for your ownership stake, which is heavily concentrated in Class A shares, are fairly well known, with the bulk of the stock going to the Bill and Melinda Gates Foundation and four different family charities over time.

Your annual pledges to these different charities involve the conversion of Class A shares, which hold significantly greater voting rights than the Class B shares.

As such, the voting control held by your estate will diminish over time, with a whole layer of super-voting shares being eliminated in the process.

While the voting influence of Class B shareholders are expected to increase over time, it will not be large enough to have a big influence on Berkshire’s affairs.

With that in mind, and recognizing the great importance on having Berkshire buy back and retire Class A shares in the long run, I was just wondering if the firm has compiled a pipeline of potential future sellers from the ranks of the company’s existing shareholders.

Given the limited amount of liquidity for the shares, privately negotiated transactions with these sellers, like the one you negotiated in December of 2012, would end up being in the best interest of both parties.

Warren Buffett:

Well, again, it would depend on the price of Berkshire.

So, in terms of what I give away annually, you know, it’s… the last two years, it’s been about
2.8billion per year. That can be… you know that’s one day’s trading in Apple.

I mean, the amount I’m giving away is, in terms of Berkshire’s market cap, I mean, you know, you’re down to seven-tenths of one percent of the market cap. So, it’s not a big market factor, and it really wouldn’t be that illiquid.

So, I know a few big holders that, you know, might have 8- or 10,000 shares of A. But the market can handle it now.

When we bought that block of… I think it was 12,000 shares of A, I mean, we bought it because we thought it increased the intrinsic business value of Berkshire by a significant amount. And we paid the seller what the market was at the time.

And, you know, we’re open to that up to 120 percent. And who knows? If it came along at a time and it was 124 percent or something, it was a very large block and the directors decided that that was OK, it still was a significant discount, we might very well buy it.

But in terms of the orderly flow of the market or anything like that, there will be no problems just as there haven’t been, you know, when I’ve given away… I do it every July… when I’ve given away the last two years.

Some of the foundations may keep it for a while. But they have to spend what I give them. And they may build up a position in B for, you know, a fairly significant dollar amount. But they’re going to sell it.

And it is true that for a period after I die, there’ll be a lot of votes still in the estate and later in a trust.

But, you know, that will get reduced over time. I see no problem with our capitalization over time.

You know, I like the idea of a fair number of votes being concentrated with people that believe in the culture strongly and, you know, would be thinking about whether they’d get a 20 percent jump in the stock if somebody came along with some particular plan.

But, eventually, that’s going to get diminished. It continues to get diminished. And I think, in terms of… you know, there’s a very good market in Berkshire shares.

And if we can buy them at a discount from intrinsic business value and somebody offers some sum… a big piece… and it may be at a hundred… stock may be selling at 122 percent, 124 percent, you know, I would pick up the phone and call the directors and see if they didn’t want to make a change.

And we did it once before. And if it made sense, I’m sure they’d say yes. And if it didn’t make sense, I’m sure they’d say no. So, I don’t think we have any problem in terms of blocks of stock or anything.

I don’t think people that own it have a problem selling it. And I don’t think we have a problem in terms of evaluating the desirability of repurchasing it.


Charlie Munger:

Nothing to add.

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