Berkshire Hathaway Class A vs. Class B: Understanding the Differences

The story of Berkshire Hathaway’s two share classes is a testament to its unique culture and the vision of Warren Buffett. For many years, Berkshire Hathaway had only its highly priced Class A shares. The steep price per share, often in the hundreds of thousands of dollars, was a deliberate strategy by Buffett to attract long term, value oriented investors. The high price acted as a filter, discouraging short term speculation.

However, as the company’s success grew, so did the share price, making it inaccessible to most individual investors. In 1996, to address the demand from smaller investors, Buffett introduced the Class B shares. This new class offered a more affordable entry point while preserving the original Class A share structure. A key event in their history was the 2010 stock split of the Class B shares, which further increased their accessibility.

While both classes represent ownership in the same underlying company, they are not identical. Think of it like buying different models of the same car: they both get you where you need to go, but one might have more features and a higher price tag.

This is the most obvious difference. The Class A shares (BRK.A) are famous for having the highest per share price of any public company in the world. A single share can cost hundreds of thousands of dollars. In contrast, the Class B shares (BRK.B) are priced at a much lower level, making them accessible to a far wider range of investors. This accessibility is the primary reason the Class B shares were created.

This is where the true power dynamic lies. A single Class A share carries significantly more voting power than a Class B share. Each Class B share has just one ten thousandth (1/10,000) of the voting rights of a Class A share. This difference is largely symbolic for most individual investors who hold a few shares, but it’s a critical factor for large shareholders seeking to influence the company’s direction.

Here’s another important distinction. Class A shares can be converted into Class B shares at any time. This conversion is a one way street. You cannot convert your Class B shares into Class A shares. The conversion feature for Class A shares can be useful for estate planning or for shareholders who need to sell only a portion of their holdings.

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So, which share class is the right choice for your investment strategy?

• When to Consider BRK.B Shares: For most individual investors, the Class B shares are the logical and practical choice. They provide the same economic exposure to Berkshire Hathaway’s diverse portfolio of businesses and stocks. You get to own a part of the company and benefit from its long term performance without the prohibitive price tag. The lower price also offers greater flexibility for building a position or selling a small portion of your holdings.
• When to Consider BRK.A Shares: The Class A shares are typically for investors with a large amount of capital who either want the enhanced voting power or who align with Warren Buffett’s philosophy of holding for the very long term. These shares are often held by institutional investors or high net worth individuals. For the average investor, the advantages of Class A shares are generally outweighed by their massive price and lack of flexibility.

Ultimately, the decision between Berkshire Hathaway’s Class A and Class B shares depends on your financial situation and investment goals. Regardless of which class you choose, you are investing in the same fundamental business. The performance of both share classes is inextricably linked to the success of the underlying company.

Warren Buffett has famously and consistently refused to split the Class A shares (BRK.A). However, the Class B shares (BRK.B) did undergo a 50 for 1 stock split in 2010. This was done to make the shares more affordable for the general public and to facilitate a major acquisition.

The Class B share price is designed to be approximately 1/1,500th of the Class A share price. This ratio is maintained through a process called arbitrage. Since Class A shares can be converted into 1,500 Class B shares, if the price ratio deviates, investors will exploit the difference, which in turn brings the prices back into alignment.

No, the conversion is a one way street. You can convert one Class A share into 1,500 Class B shares at any time, but you cannot convert Class B shares into Class A shares.

No. Berkshire Hathaway does not pay a dividend on either its Class A or Class B shares. This is a deliberate strategy by Warren Buffett and the board to reinvest all earnings back into the company, which they believe generates a higher return for shareholders over time.