Retail Investors, Rejoice: Berkshire Hathaway Joins S&P 500
Prior to a 50-1 stock split last month, the $3,400-and-change share price of the Class B shares precluded them from S&P 500 membership. The stock, currently trading at almost $76, has gained about 10% since the Jan. 20 split, helped by index fund buyers.
Berkshire introduced the (relatively) lower priced Class B shares in 1996 in order to allow smaller investors to gain entry to the company. The Class A (BRK.A) shares, which won't split, currently go for about $114,000 a pop.
Buffett maintained the high prices of both classes of stocks to keep out "inferior buyers," since the cost of a single share made the stock too unwieldy for professional speculators and too pricey for most retail investors.
The split was necessitated by Berkshire's November agreement to buy the 77% of Burlington Northern Santa Fe (BNI) it didn't already own. Berkshire is paying $100 a share for the railroad, with 60% in cash and 40% in Class B stock. By splitting the stock, Berkshire is essentially breaking a large-denomination bill into a big pile of small change to distribute in the stock portion of the purchase.