Yes, but Berkshire’s stock transfer agent won’t handle the conversion from B to A. You sell them on the market and are taxed accordingly.
Their stock transfer agent will give you B shares in exchange for an A share, which is not a taxable event. It’s a mechanism to encourage arbitrageurs to keep the prices of the share classes in lockstep.
I think there may be some conditions for private sales of class B shares, like if a member of the founding family wants out and sells their shares to current management. Not being privy to any folks who have class B shares, I wouldn't know. There's definitely not a liquid market like the public exchanges - it's like selling stock in a private company.
Edit: just thought of a public company with both class A and B shares. Berkshire Hathaway (Warren Buffett's company) has class B shares that each have 1/30 the rights of class A shares, except that they have 1/200 the voting rights. Right now, they're trading at almost exactly 1/30 the price of BRK-A, so the market doesn't seem to give much weight to the reduced voting rights. It's worth noting that BRK-B shares were created for a very different reason than the article is about: some mutual fund manager was about to setup a mutual fund that invested only in Berkshire Hathaway but let you invest in chunks of much less than the $100k share price of BRK-A, so Buffett figured that if someone was going to arbitrage the share price, he might as well be the one doing it instead of letting a money manager pocket the liquidity premium.
And it’s likely not optional. Any transfer of shares to someone who is not already a Class B holder will probably trigger a conversion. Iirc that’s how Facebook and Google’s shares are structured.
If it were public, yeah, but usually class B shares are not tradable. Their whole purpose is to keep ownership in the founding family or founding investors.
Yes. Aside from voting rights, it's exactly that. It's hard to predict what the market will do in the face of the voting rights issue, though.
Berkshire Hathaway has a similar split between A and B stock, but they have an automated process in place to keep the prices in parity that involves converting A stock into B stock. They don't actually handle about the reverse, so B stock can indeed trade under parity. It's lower price (~1/30th of A stock, typically) means a greater demand, though, since relatively few people are buying A stock at $120k.
I thought the old Class B shares converted on transfer? Did the split change that, or am I misunderstanding that passing the shares to offspring would be a transfer?
If this ever becomes a concern, the class B shareholders can convert their shares 1 to 1 into class A shares. Once all class B shares have been converted, class C shares will also convert 1 to 1 into class A shares. This would then make the company eligible to be included in the S&P 500.
I imagine that the class B shares are nontransferable, which means that this will cease to be an issue once the founders have fully cashed out.
The problem with your logic is that when Berkshire takes a position in a new company, you, not being a BRK shareholder, must pay a significant premium to clone that position. In other words, once it becomes public info that BRK bought a lot of company X stock, that stock will likely have jumped 10-20%, and you're forced to pay the higher price to maintain parity.
They probably just use BRK.B for most HFT involving BRK. The one-way transfer from Class A to B shares (and the different voting rights) reduces the supply of Class A shares due to a myriad of reasons. This makes the daily volume for Class A shares lower than Class B (when normalized by the trade ceiling imposed by Berkshire).
> If the buying firm doesn’t need approval from the Class A shareholders, what would be their incentive to buy those Class A stocks at a premium?
Supervoting stock usually converts into regular stock on transfer. For example, Rent the Runway says "future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes" [0].
Delaware law is also developed in protecting minority investors' rights [1]. (The situation varies from state to state [2].)
In fairness to Berkshire, the A and B shares are both traded on exchanges. If the voting rights are important to you, you can just buy the A shares. In theory, if you had a metric ton of money, you could take control of the company just by buying shares there.
In Snap, you can't go on exchange and go buy the voting shares. They're held by insiders who won't sell at anywhere near the price of the non-voting shares.
Berkshire has two classes of stock A and B. B is targeted towards retail investors (trading ~$280.50 per share ATM). They don't want to split A shares because they believe that the high price attracts like minded investors focused on long term profits.
Their stock transfer agent will give you B shares in exchange for an A share, which is not a taxable event. It’s a mechanism to encourage arbitrageurs to keep the prices of the share classes in lockstep.
https://www.berkshirehathaway.com/brkshareholderinfo/compab....
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