Berkshire Hathaway Class A vs. Class B Shares: What’s the Difference?
Berkshire Hathaway Class A vs. Class B Shares and Berkshire Hathaway, one of the world’s largest and most respected investment firms, has two types of stock: Class A (BRK.A) and Class B (BRK.B). While both represent ownership in the company, there are key differences between the two that investors should understand before making a decision. These differences range from price, voting power, to convertibility. Here’s a breakdown of what sets Berkshire Hathaway’s Class A and Class B shares apart:
1. Price Difference: Berkshire Hathaway Class A vs. Class B Shares
Class A Shares (BRK.A):
- Berkshire Hathaway Class A shares are significantly more expensive than Class B shares. As of 2023, the price for a single Class A share is over $400,000.
- The high price of BRK.A makes it less accessible for many retail investors. It’s typically purchased by institutional investors, wealthier individuals, or those with more capital to allocate.
Class B Shares (BRK.B):
- Class B shares are a fraction of the price of Class A shares. Typically priced in the hundreds of dollars, Class B shares offer more accessibility to the average investor.
- Initially, Class B shares were created to enable smaller investors to participate in Berkshire Hathaway’s growth without needing vast amounts of capital.
2. Voting Power: Berkshire Hathaway Class A vs. Class B Shares
Class A Shares (BRK.A):
- Class A shareholders enjoy significantly more voting power than Class B shareholders. Each Class A share carries one vote, which gives owners a stronger voice in the company’s decisions.
- Class A shares are designed for those who want to have a larger say in Berkshire Hathaway’s annual meetings and corporate governance.
Class B Shares (BRK.B):
- Class B shares come with very limited voting power. Each Class B share carries only 1/10,000th of the voting power of a Class A share.
- While this is a minimal stake in the company’s decision-making process, it still allows shareholders to vote on major company matters, albeit with less influence.
3. Convertibility: Berkshire Hathaway Class A vs. Class B Shares
Class A Shares (BRK.A):
- One notable feature of Class A shares is that they can be converted into Class B shares at a rate of 1:1,500 (i.e., 1 Class A share can be converted into 1,500 Class B shares). However, the conversion is irreversible.
- This feature provides Class A shareholders with flexibility if they want to sell their shares but at a lower price point.
Class B Shares (BRK.B):
- Class B shares cannot be converted into Class A shares, providing them with less flexibility than Class A shares. Investors who purchase Class B shares will always hold Class B shares, even if the value of Class A shares increases dramatically.
- However, the Class B shares offer an affordable entry point into the company without the need to commit large amounts of capital.
4. Dividend Payment: Berkshire Hathaway Class A vs. Class B Shares
Berkshire Hathaway has famously avoided paying dividends on its shares, whether Class A or Class B. Warren Buffett, the CEO of Berkshire Hathaway, prefers to reinvest the company’s profits into new acquisitions or investments rather than distributing them to shareholders. As a result, both types of shares are designed for those who are looking for long-term capital appreciation, not immediate income in the form of dividends.
5. Stock Split History: Berkshire Hathaway Class A vs. Class B Shares
Class A Shares (BRK.A):
- Berkshire Hathaway has never split its Class A stock, and the company’s stance on stock splits is clear: it does not plan to split Class A shares because Buffett wants to attract long-term investors who can afford to buy the shares at a high price.
Class B Shares (BRK.B):
- In 1996, Berkshire Hathaway introduced Class B shares, which allowed the company to cater to a broader investor base. Class B shares were designed to be more affordable and offered a way for investors to participate in the company’s performance without needing millions of dollars.
- Additionally, there has been a major conversion feature for Class A to Class B shares that has facilitated liquidity and market accessibility.
6. Liquidity and Accessibility: Berkshire Hathaway Class A vs. Class B Shares
Class A Shares (BRK.A):
- Due to their high price, Class A shares are far less liquid than Class B shares. Investors who wish to buy or sell Class A shares may have more difficulty due to the smaller number of shareholders.
- They tend to attract long-term institutional investors, such as pension funds, and wealthy individuals.
Class B Shares (BRK.B):
- Class B shares are much more liquid due to their lower price. The affordability and large number of shares make them an attractive option for retail investors.
- They are easily traded on the NYSE and represent a more accessible way to own part of Berkshire Hathaway.
7. Impact on Shareholder Returns: Berkshire Hathaway Class A vs. Class B Shares
Despite the price difference, the overall returns for Class A and Class B shareholders have been nearly identical over time. Both types of shares track the overall performance of Berkshire Hathaway. Investors holding Class B shares will generally see similar returns as those holding Class A shares, albeit with fewer voting rights and less flexibility for conversion.
Conclusion: Berkshire Hathaway Class A vs. Class B Shares
While both Berkshire Hathaway Class A and Class B shares represent a stake in the same company, they differ significantly in terms of price, voting power, convertibility, and accessibility. Class A shares are ideal for institutional investors or those with significant capital who are looking for a more influential role in corporate governance, while Class B shares provide an affordable and accessible means for retail investors to gain exposure to one of the most successful investment companies in the world.
For the average investor, Berkshire Hathaway’s Class B shares are often the most practical option, offering a relatively low-cost entry point while still benefiting from the company’s long-term growth. However, those with the financial means and desire for greater influence may prefer Class A shares, despite their high cost and limited liquidity.
