Berkshire Hathaway to Offer a Stock for Small Investors

Betting on Buffett.

That’s what small investors will finally get their chance to do because Warren E. Buffett--folksy billionaire, stock picker extraordinaire and chairman of Berkshire Hathaway Inc.--said Tuesday that he plans to offer more “affordable” stock in Berkshire to the public.

Berkshire, besides being Buffett’s vehicle for his renowned investments in other companies, has the most expensive stock on the New York Stock Exchange. A single share costs the same as a new luxury car; the stock closed at $31,700 on Tuesday, down $200 on the day.

Now Buffett plans to offer a second class of Berkshire stock, Class B common, that would initially sell for 1/30th the price of the existing common, which would be renamed Class A stock. Based on Tuesday’s close, the Class B stock would sell for roughly $1,060 a share.

But it’s a narrow opening for Buffett enthusiasts. Berkshire’s plans indicate that fewer than 100,000 of the new Class B shares will initially be offered.

The Class B also would have only 1/200th of the vote that each Class A share now has on matters put to Berkshire’s holders for ratification. The biggest holder is Buffett, whose 40% stake is worth $15 billion, which puts him neck-and-neck with Microsoft Corp.’s Bill Gates as America’s richest individual.

Buffett, 65, has always rejected splitting Berkshire’s stock--and thus creating more, lower-priced shares--to ward off speculators in the stock and to maintain a base of shareholders who, like him, are patient, long-term investors. Berkshire currently has a relatively small 1.77 million shares outstanding.

In fact, Berkshire has gone without a split since Buffett took control of the company in 1965 and its stock sold for $18 a share.

But a “reluctant” Buffett said he’s offering the new shares “to forestall” the efforts of a few outside money management firms that are, in effect, offering the public a way to invest in Berkshire more cheaply.

The firms run unit investment trusts that would buy Berkshire’s high-priced stock (and the shares of Berkshire’s own favorite investments) on the open market, then sell units of those trusts to the public for roughly $1,000 apiece.

But Buffett complained to reporters via a teleconference that the trust managers charge fees that would “impose very significant costs” on those investors. He also said the trusts would attract “probably tens of thousands, and perhaps even hundreds of thousands,” of investors with “unrealistic expectations” about Buffett’s investment prowess.

Buffett frets that the trusts could in effect draw in many investors who know him by reputation only, and therefore could dramatically alter the public’s perception of his ability to deliver huge returns year after year.

“It is very much in our interests not to have a shareholder body . . . that has been disappointed,” Buffett said, adding that he’s long “tried not to disappoint anyone” in his career, partly by having “knowledgeable investors” who know his style of investing.

Ownership of Berkshire is “nothing that we encourage or discourage, as long as people make up their own minds,” he said.

To be sure, a $1,000 stock isn’t exactly cheap, although it is the same amount that many mutual funds require as an initial investment.

Buffett “doesn’t like the fact that he’s going to get people into this stock who might have notions that are probably not realistic about the long-term outlook for Berkshire Hathaway,” said James K. Mulvey, who follows Berkshire for Dresdner Securities Inc. in New York.

Berkshire, based in Buffett’s hometown of Omaha, is a parent for various holdings that include See’s Candies Inc., World Book encyclopedias and the Buffalo (N.Y.) News newspaper.

But it’s also hit home runs by investing in such companies as Wells Fargo & Co., Gillette Co. and Coca-Cola Co., whose own soaring stock prices have lifted Berkshire’s steadily higher in recent years.

The Class B stock won’t be available at least until May 6, which is when Berkshire’s current stockholders vote on the plan at their annual meeting.

* INVESTOR SPOTLIGHT

Berkshire Hathaway’s rapid rise. D9

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Sky-High Stake

The 10 most expensive single share prices of companies trading on U.S. exchanges Tuesday, omitting preferreds, with closing prices:

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Stock Price Berkshire Hathaway $31,700.00 Washington Post 289.75 United Counties Bank 262.50 Wells Fargo 254.50 First Empire State Bank 242.00 Ito-Yokado* 234.75 Grey Advertising 220.75 Alleghany 200.50 Mitsui* 178.00 Wesco Financial 176.00

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* American depositary receipt (foreign company trading in U.S.)

Source: Associated Press