Comments on: Berkshire’s weird buyback http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: MrRFox http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45168 Thu, 13 Dec 2012 15:03:22 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45168 @BernardoCM – you’re not missing anything; it’s all the others who are looking for ghosts and have convinced themselves that they see them, particularly this fellow –

“… it still seems like an insider got early access over common shareholders.”

Early access to what – to sell low before the stock popped? The only guy who might have gotten screwed on this deal was the dead guy whose estate may have sold cheap – he’s past caring about that now though. (If Buffett hadn’t done the buy, odds are the estate would have gotten even less.)

Buffett made $3k a share on the 9k shares yesterday – like he has something to apologize to anyone for?

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By: billyjoerob http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45166 Thu, 13 Dec 2012 12:28:07 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45166 This is all a sham because BRK doesn’t have to go into the market to buy shares. It already owns a ton of BRK shares via the insurance sub, I forget the name, I think it’s National Indemnity. The insurance sub got the shares via the BNSF transaction (it received BRK shares in exchange for BNSF shares), so all BRK need do is go to the insurance sub, buy and retire the shares, and voila, buyback accomplished. Buffett has done this throughout his career, from the very beginning of owning Berkshire. It’s his secret sauce. This is all laid out, albeit somewhat sub rosa, in The Snowball.

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By: Cogitator99 http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45163 Thu, 13 Dec 2012 07:24:12 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45163 Salmon, you’re missing the point. It’s fairly obvious that you haven’t bothered to look into the financials of the company lately to get any idea of its value. Berkshire’s intrinsic value is higher than its book value, and if Buffett can buy shares of the company below its true worth, then it is beneficial to continuing shareholders.

The fact that you: 1) used Yahoo! Finance for your “numbers” and 2) didn’t even know about BRK’s earlier buyback really shows your lack of knowledge about the company.

Should probably stick to commenting on AAPL and Greece.

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By: Cogitator99 http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45162 Thu, 13 Dec 2012 07:22:18 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45162 Felix, you’re completely missing the point. It’s fairly obvious that you haven’t bothered to look into the financials of the company lately (if ever) to get any idea of its value. Berkshire’s intrinsic value is higher than its book value, and if Buffett can buy shares of the company below its true worth, then it is beneficial to continuing shareholders.

Additionally, BRK’s logic towards repurchases is public and well-documented, which (again) you would know had you actually read past company filings.

The fact that you: 1) used Yahoo! Finance for your “numbers” and 2) didn’t even know about BRK’s earlier buyback really shows your lack of knowledge about the company, so why bother commenting?

Should probably stick to talking about AAPL and Greece; keep churning out five-minute analyses like this and you’ll be the next Ben Stein.

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By: Anonymous http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45158 Wed, 12 Dec 2012 22:50:42 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45158 “Firstly, they reduce the number of shares outstanding, which means that the value of the remaining shares goes up: the company is worth the same amount, so the value per share is higher.”

A share buyback by definition reduces the value of the company. It uses some of its book value to buy back the outstanding shares. It will not affect the stock price since the loss in book value will be equally offset by the fewer shares on the market. Thus its market cap will be reduced but the per share price will be equal.

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By: fintime http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45155 Wed, 12 Dec 2012 22:02:19 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45155 QCIC is right – cash goes out the door. Company is worth less, but fewer shares outstanding. And actually (this is the whole Berkshire thing), Book Value Per Share DECREASES when you repurchase at prices above Book Value. $2B company, 100 shares = $20M BV/share. Buy back shares at 120% Book, or $24, and you now have $1.976B and 99 shares = $19.96M BV/share.

So very interestingly Berkshire’s buybacks limit themselves – book value per share falls as long as they buy at over 100%.

The article is right that it is just weird. Apparently they couldn’t announce first as the price would shoot up, but they obviously got the deal pen-ready, approved 120%, signed the deal, and then announced the new rules. Maybe THAT’s why trading was halted, but it still seems like an insider got early access over common shareholders.

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By: Auros http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45154 Wed, 12 Dec 2012 21:46:17 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45154 BTW, the unreliability of that free data you were using about trading volumes kinda illustrates the point I and other commenters were making on your post about Bloomberg and LinkedIn.

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By: QCIC http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45149 Wed, 12 Dec 2012 19:50:24 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45149 “the company is worth the same amount”

It is not worth the same amount, it has a smaller amount of cash on hand (or higher debt) in whatever amount it paid for the stock.

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By: Bernardo_CM http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45148 Wed, 12 Dec 2012 19:02:55 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45148 I don’t understand the first reason. If you buy some shares at market value, the share value of the remaining ones should remain pretty much unchanged… I guess I’m missing something.

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By: Auros http://blogs.reuters.com/felix-salmon/2012/12/12/berkshires-weird-buyback/comment-page-1/#comment-45147 Wed, 12 Dec 2012 18:59:24 +0000 http://blogs.reuters.com/felix-salmon/?p=19795#comment-45147 What KenG_CA said. The market price for Berkshire shares is more than the book value of Berkshire’s assets. (That’s normal for most healthy companies. In fact, Berkshire has a relatively low multiple, though I’d guess that most companies they’ve bought had higher multiples before assets got evaluated for Fair Market Value, and assigned some Goodwill, during the process of being merged into the Berkshire empire.)

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