Warren Buffett, the esteemed leader of Berkshire Hathaway, has long maintained a skeptical view of stock splits, asserting that they often lead to elevated trading expenses, draw in short-term traders, and decouple a share's market price from its intrinsic business value. He has consistently argued that such divisions can undermine the foundational principles of long-term ownership that Berkshire Hathaway has meticulously cultivated over decades.
Despite his general opposition, Buffett sanctioned two notable exceptions in Berkshire's operational history. The first was the introduction of Class B shares in 1996, conceived to counteract the proliferation of high-fee investment vehicles mimicking Berkshire and to provide a more accessible entry point for genuine long-term investors. These Class B shares were initially valued at approximately 1/30th of a Class A share, accompanied by reduced voting rights, ensuring a substantial enough investment threshold to deter purely speculative interest. The second exception occurred in 2010 with a 50-for-1 split of the Class B shares, a strategic move to facilitate the acquisition of Burlington Northern Santa Fe (BNSF). This action was explicitly positioned as a means to finalize the deal, rather than a deviation from his fundamental stance on stock splits.
For investors, Buffett's approach underscores crucial lessons: avoid confusing a lower share price with genuine value, as splits do not alter a company's underlying fundamentals but can influence investor behavior. Furthermore, Berkshire's dual-class share structure exemplifies how a company can broaden accessibility for smaller investors without compromising its core investment philosophy or the integrity of its long-term shareholder base. By carefully managing share structures, companies can foster a culture of committed, long-term ownership that aligns with strategic growth and stability.
Ultimately, Buffett’s unwavering commitment to his principles highlights the importance of intrinsic value over market price. His decisions, even the rare exceptions, were meticulously crafted to uphold the integrity of Berkshire's shareholder base and reinforce a culture of long-term investment, guiding investors to focus on fundamental business strength rather than speculative trading. This steadfast vision ensures that the company attracts and retains investors who truly understand and appreciate its enduring value.