Warren Buffett's Berkshire Hathaway Class A shares briefly soared 51% to $661,504 on a single trade
- Class A Shares of
Berkshire Hathawaybriefly soared 51% in after-hour tradingon Tuesday.
- Three single-share trades were executed at a price of $661,504, but the gains were short lived.
- The likely accidental trades highlight the illiquidity and wide spreads of Berkshire Hathaway's Class A shares.
Class A shares of
But the trades were real, according to data from Nasdaq, which showed that three Class A shares were traded at a price of $661,504, representing a $223,614 gain from its Tuesday closing price of $437,890. That gain was short lived, as the stock is trading around $427,000 early Wednesday.
The first trade at the inflated price occurred at 4:21 pm, while the other two trades occurred at 4:23 pm and 4:24 pm.
The likely accidental trades highlight the illiquidity and often wide bid/ask spread for Class A shares of Berkshire Hathaway, especially after the market closes. The stock has average daily trading volume of just 1,160 shares.
Buffett has resisted a stock split since he took over Berkshire Hathaway in 1965. At the time, Berkshire Class A shares traded at about $19 per share. But as the stock rose to record levels most investors couldn't afford, calls grew for a stock split.
Warren Buffett fended off those calls by introducing lower priced Class B shares in 1996. At the time, Class A shares traded just above $30,000, while Class B shares started trading at 1/30th the price, around $1,000. Today, Berkshire's Class B shares trade just below $300, in part due to a stock split in 2010 after Berkshire purchased railroad operator BNSF.
Buffett's reasoning behind not splitting the Class A shares is his quest to attract high-quality buy-and-hold investors that are more focused on the long-term growth and sustainability of the business rather than the price level of the stock.
In a 1995 shareholders meeting, Buffett said splitting the stock would likely attract short-term investors who had little knowledge about the underlying business.
"I know that if we had something that it was a lot easier for anybody with $500 to buy, that we would get an awful lot of people buying it who didn't have the faintest idea what they were doing," Buffett said.
The investor who accidentally purchased the three Class A shares of Berkshire Hathaway at a 51% premium also likely didn't realize what they were doing, as those three shares now represent a total loss of about $670,000 as of Wednesday morning, assuming the same investor bought all three.
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