2011: What are the short and long term effects of stock splits?

AUDIENCE MEMBER: I’m Martin Greenberger, UCLA Anderson School, where I work in disruptive technologies, not finance.

WARREN BUFFETT: You’re forgiven. Go ahead. (Laughs)

AUDIENCE MEMBER: My friend Walt would like to know if Berkshire has been considering splitting its Type A shares, like it did its Type B shares, and if so, what are the pros and cons, in your opinion? And what would be the short-term and longer-term effects?

WARREN BUFFETT: Yeah. Well, in effect, we’ve already split it, you know, 1500-for-one by having the B available.

And, you know, we have a situation where the company will never be sold, but if any transaction involves the A stock, the B shares are going to get treated exactly the same. So there’s really no disadvantage to owning the B stock, except it has somewhat less voting power than the A stock.

But in every other way it’s the same instrument, and so we already have a split stock available.

So I would tell Walt that he really should not count heavily on the A stock getting split.

Charlie?

CHARLIE MUNGER: Yeah, Warren used to cheer up his old friends by telling them, may you live until the A stock splits. (Laughter)