Warren Buffet is in the news again, over on the goldmember list, and no doubt countless thousands of lesser media . At the annual shareholder meeting, the 10,000 or so shareholders turn up for what amounts to a great big party. As well as a meeting where the company actually talks to the shareholders.
"Vice Chairman Charles Munger and Buffett fielded questions from the crowd for about six hours about their investment philosophy, succession plans and reaction to criticism to Buffett's board seat on Coca-Cola Co. "
What other company does that? Companies I know don't hold any shareholder meetings, let alone let them ask questions. Warren Buffet, is every investor's hero, and the founders of google recently wrote him up as their God, as well.
"Shares of Berkshire, which owns energy, aviation, paint and carpet companies, have increased 28 percent in the past year compared with a 19 percent gain for the Standard & Poor's 500 Index. The shares fell $110 to $93,390 in New York Stock Exchange composite trading on Friday. "
Mr. Buffet never splits, and thus the price goes higher and higher and higher ... His motive here is quite simple. Buffet, the world's best investor, wants to exclude small shareholders from his register. This price is so high that not only can no ordinary investor afford even one of his shares, but most systems cannot quote a price in it. (Check the WSJ, it's not there, last I heard.)
He has basically excluded all of the hoi polloi. In marketing terms, this is called "price discrimination." He has chosen an educated base of shareholders, using the proxy of wealth, as the tool to select his shareholders. Quite valid stuff, albeit an unusual use of an old marketing tool.
Here's how we arbitrage it. To frustrate him, we (being Ivan, a potential issuer) would buy one Berkshire-Hathaway share. One will do for now, we can always pick up another later! This share we escrow in the normal fashion with a transfer agent.
Then, we designate our one share as reserves for an issue of Ricardian instruments. Instead of issuing one derivative share backed by the one real Berkshire-Hathaway share, we would issue 100,000 microshares. These instruments I call Bufflets, and their price would be more likely around ninety three cents.
Hey presto, we arbitrage the marketing. With our 100,000 Bufflets, even your 10 year old can afford to become an investor in Berkshire-Hathaway. Mind you, only one of us gets to go to the party every year, but that's maybe the subject of a shareholder's meeting yet to come.Posted by iang at May 3, 2004 02:57 PM | TrackBack