Author Topic: BRK Shares Conversion  (Read 4218 times)

20ppy

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BRK Shares Conversion
« on: July 31, 2009, 02:04:01 PM »
Converting from A shares to B shares is quite straightforward, but my question is how about B to A? I understand brokerages don't do that by design. So who can and does the conversion from B to A? If nobody ever does it, how can B shares maintain it's prices relative to 1/30th of A's?



JAllen

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Re: BRK Shares Conversion
« Reply #1 on: July 31, 2009, 02:26:07 PM »
I'm almost sure you can't convert them to b's.

I meant A's duh....
« Last Edit: August 01, 2009, 08:32:18 AM by pof4520 »

nodnub

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Re: BRK Shares Conversion
« Reply #2 on: July 31, 2009, 02:40:38 PM »
20ppy

B shares can not be converted to A.  No investor or brokerage can do this.  Hypothetically, I would imagine that the company could buy in B shares, cancel them, and issue 1/30 as many A shares in their place, if deemed necessary or useful.

Your second question is somewhat vague. It is logically similar to:
1) Why does any stock maintain it's price? 
Or perhaps: 2) How does any company that does not pay a dividend maintain it's share price? 

The answer is that investors have faith that their electronic record of share ownership represents a share of a business, and that in the future, their prices of the share will grow or shrink along with the success of the company. If you don't believe in that idea then I am afraid you may be on the wrong message board.

Voting control at Berkshire is irrelevant in the near future, so there is no sizable premium for A shares (which have greater relative voting power per dollar of share price)

Apologies if I have misunderstood your questions.

woodstove

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Re: BRK Shares Conversion
« Reply #3 on: July 31, 2009, 04:35:24 PM »
Hi 20ppy...  There's no formal option to convert B's to A's, but rational value investors tend to keep the A-to-B ratio within 30:1 to say 2 pct overage, 30.6:1 range.  Mr Buffett discusses that in one of the annual reports shortly after the B's were issued - see 1997 perhaps.  Also, besides the actions of investment professionals, there are individual shareholders who trade the A-to-B ratio: when A/B goes higher than usual, sell A to buy B's; and vice versa when A/B goes lower than usual.  You can find some old posts about what is usual on the Motley Fool BRKA board, which is readable without joining I believe, and more recent discussion on the Yahoo chucks_angels group, which is worth joining for coverage of precisely that sort of topic.  Trading the A/B ratio gives some almost-all-Berkshire long term holders something to do, to keep them from dabbling in murky waters.

20ppy

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Re: BRK Shares Conversion
« Reply #4 on: July 31, 2009, 04:49:50 PM »
Thanks for all the good replies to the questions that were not entirely clear. But the idea was to understand who actually do B to A as a service or something like that. I think I get the general picture. Berkshire is probably the only one that might do B to A conversion if and when needs arise.


bookie71

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Re: BRK Shares Conversion
« Reply #5 on: August 01, 2009, 09:12:27 AM »
I don't believe that the B's can be converted to A's.  That is why the Gates foundation is only getting B"s.
Always remember, Pigs get fat and hogs get slaughtered.

ubuy2wron

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Re: BRK Shares Conversion
« Reply #6 on: August 03, 2009, 09:19:44 AM »
Warren is converting a's to B's and then donating the B's to the Gates foundation which then sells them. I have not thought this through but at some time control of Berkshire has to come into play

Kiltacular

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Re: BRK Shares Conversion
« Reply #7 on: August 03, 2009, 08:40:48 PM »
ubuy,

Don't forget that, while each "B" share has 1/30th the economic interest of an "A" share, it only has 1/200th the voting power.  So, Buffett will retain control of Berkshire until his death.