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The $4.5 Billion Dollar Bank Run
Nov 07 201111:20 am EDT -
The Times' Rorshach Geithner Story
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Counter-cyclical Urban Policy
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Be Your Own Counterfeiter
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Being Tim Geithner
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Notes From a Press Conference Naif
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What Good is the News?
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Stressful Enough
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Not Regretting the Pound
Apr 24 20091:09 pm EDT
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The Berkshire Hathaway Arbitrage
How much did Berkshire Hathaway stock fall last week? Well, the A shares opened Tuesday (Monday was a holiday) at $86,900, and closed at $77,000 -- a fall of $9,900, or 11.4%. The more liquid B shares, by contrast, opened at $2,802 and closed at $2,387 -- a fall of $415, or 14.8%. That's a big difference.
Now the B shares have 1/30th of the economic value of the A shares, but only 1/200th of the voting rights. They began the week worth about 1/31 of an A share, and ended it worth less than 1/32 of an A share. Given that the seeming arbitrage persisted all week, the market might well be starting to value those A-share voting rights.
"In my opinion," says Warren Buffett, "when the B is at a discount of more than say, 2%, it offers a better buy than the A." Right now the discount is a whopping 7%. So if you want to take Buffett's advice, start buying up B shares. If, that is, you want to buy his stock in the first place. Which is a different matter entirely.
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