Skip to comments.After Dropping Under $100,000/Share, Berkshire Hathaway Announces Stock Buyback Plan
Posted on 09/26/2011 7:24:17 AM PDT by SeekAndFind
Warren Buffet came, he saw BRK/A trading at $99,000, he took a bath, and decided that this aggression against BRK/A will not stand, man.
As a result, after taking a metaphorical bath on BAC, the Octogenarian has just decided to launch a share repurchase program in the company with the massive short S&P put, because "In the opinion of our Board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise."
In other words, Buffett is slowing starting to realize that he has to put up or shut up, and very soon he will also realize that just because the president allegedly has his back (it is not called the "Buffett Plan" for nothing), he won't have a "perpetual get out of risk card" for life, and America's taxpayers may soon let the world's most crony capitalist just fail.
Our Board of Directors has authorized Berkshire Hathaway to repurchase Class A and Class B shares of Berkshire at prices no higher than a 10% premium over the then-current book value of the shares. In the opinion of our Board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise. If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares, benefiting shareholders who retain their interest.
Berkshire plans to use cash on hand to fund repurchases, and repurchases will not be made if they would reduce Berkshires consolidated cash equivalent holdings below $20 billion. Financial strength and redundant liquidity will always be of paramount importance at Berkshire.
Berkshire may repurchase shares in open market purchases or through privately negotiated transactions, at managements discretion. The repurchase program is expected to continue indefinitely and the amount of purchases will depend entirely upon the levels of cash available, the attractiveness of investment and business opportunities either at hand or on the horizon, and the degree of discount from managements estimate of intrinsic value. The repurchase program does not obligate Berkshire to repurchase any dollar amount or number of Class A or Class B shares.
Wait a second there Mr.Buffet ... you need to pay more taxes because you said you should.
Why do i picture him as an old man that saves his toe nail clippings in old mason jars
Naw, he’s going to take a HUGE tax write off, and end up paying zero tax just like GE.
Expand and grow their own business, including new hires.
Make a strategic aquisition
Declare a special one time dividend and return it to the shareholders.
Companies usually do it to make themselves LESS attractive as a potential takeover candidate..and of course, this allows lousy management to stay in place...with their high compensation and perks.
BH isn't quite the same example..it's waaay to big to be taken over, and it's more of a holding company. Nevertheless, for an astute stock picker like Buffet, it's hard to believe that he couldn't identify one or more companies that represent excellentg value..as opposed to merely buying back BH stock..
I remember reading that during the Crash of 1929, companies used scarce cash to buy back their shares in a vain attempt to prop up prices, using the same rationale as Buffet.
“If history doesn’t repeat, it sure echoes.” (said by someone smarter than me).
Okay, I’m gong to spout my theory and it is not good...
We are entering a very bad time (market wise).. The instant buy/sell computer market has made it almost impossible for normal buyers and sellers.
We have entered a new age where only the ultra-rich can make any money on the market. It will oscillate according to their actions. Big money moves the markets - up, down, no matter to them, they still can make money. The small investor is held hostage to their actions.
So... While the long term investor (use to be you and me) try to invest our money and make plans for our retirement, the spot investors (major money markets) continue to drain the markets.
Today, investing in a known stock has consequences - not just how the company will do but what the major money investors do. That makes it a crap shoot for the small investor.
The internal insight of the traders along with their instantaneous transaction times make it almost impossible to make any profits in the market (It is all their insight and inside benefits). We can and do keep stocks for a long period of time which if we are lucky make about 5% profit these days. Most of this could be obtained by investing in either bonds or other options without the danger of losing it all.
The bottom line is that the stock market has become a very adventurous proposition and should be invested in very carefully.
PS: This is strictly my opinion only... Feel free to invest as you please...