On the New York stock exchange, there are 2 Berkshire Hathaway stocks listed. BRK-A (at $139,600/share) and BRK-B (at $4,625/share). Other then a huge difference in share cost, the 2 stocks almost exactly track each other, for the 18 years I can see.
So what is the difference between the stocks?
From a quick web search - can’t vouch for the source, but it doesn’t sound unreasonable:
The B stock is more affordable but only has 1/200th of the voting rights compared to the A shares. It is supposed to track to 1/30th of the A shares cost.
A can convert to B but not the other way around.
It’s a bit more than just “working” to keep the B shares at 1/30 of the value of the A shares. B shares are entitled to exactly 1/30 of any payments A shares get so 1/30 of the value would be where you’d expect the price to be (ignoring the value of the vote).
Furthermore since an A share can be converted into 30 B shares, if the demand for B shares drives their value to more than 1/30 of an A share, an arbitrage would be created. Buy an A share covert it to 30 B’s and sell. So the price can never get too far above 1/30 of an A. It can go a bit above, since there would be costs to do this and since you’d have to be sure you could sell all 30 B’s.
On the other hand there is no arbitrage pressure to keep the B’s all the way up to 1/30 of an A.
Thanks folks. Now to go scrape up $4600 in sofa change, and buy a share.
Well, you did me a favor. I’ve been meaning to look into this, as I’m thinking of buying some shares in '08. Saved me some research. Thanks!