A:

The primary difference between Berkshire Hathaway's Class A stock (BRK-A) and Class B stock (BRK-B) is the share price. As of January 2018, Berkshire Hathaway Class A is trading for around $304,180 per share, compared with $202 for the Class B shares. But there are other distinctions.

Twenty years ago, the company was content with its highly valued, single class of stock. But the market was demanding a lower-priced, more common-stock nibble at the Berkshire pie. So in 1996, Warren Buffett, CEO of Berkshire Hathaway, and the board responded by issuing 517,500 shares of Class B shares (BRK-B), offering the ability to invest in the company for, initially, one-30th the price of a Class A share of stock. A 50-to-1 stock split in 2010 sent the ratio to one-1,500th. Class B shares carried correspondingly lower voting rights as well (one-two hundredth of the per-share voting rights.)

The main reason for the introduction of Class B shares was to allow investors to be able to purchase the stock directly instead of having to go through unit trusts, or mutual funds that mirror Berkshire Hathaway's holdings. Buffett explained this as follows in his 1996 annual letter to shareholders: "As I have told you before, we made this sale in response to the threatened creation of unit trusts that would have marketed themselves as Berkshire look-alikes. In the process, they would have used our past, and definitely non-repeatable, record to entice naive small investors and would have charged these innocents high fees and commissions." If the stock was left in the hands of unit trusts, "Berkshire would have been burdened with both hundreds of thousands of unhappy, indirect owners (trustholders, that is) and a stained reputation."

Buffett has also declared that the Class A shares will never experience a stock split because he believes the high share price attracts like-minded investors, those focused on long-term profits rather than on short-term price fluctuations.

Along with being more accessible to retail investors, Class B shares offer the benefit of flexibility. If an investor owns just one share of Class A and is in need of some cash, the only option is to sell that single share, even if its price far exceeds the amount of capital he needs to access. In contrast, a holder of Class B shares can liquidate part of his or her Berkshire Hathaway holdings just up to the amount needed to meet cash flow requirements. Class B also provides a potential tax benefit. Its much lower price means that BRK-B stock can be passed to heirs without triggering the gift tax as passing Class A shares does.

One final difference is that Class A shares can be converted into an equivalent amount of Class B shares any time a Class A shareholder wishes to do so. The conversion privilege does not exist in reverse. Class B shareholders can only convert their holdings to Class A by selling their Class B shares and then buying the equivalent in Class A.

For related reading, see "Warren Buffett: How He Does It."

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