Very Sneaky Mr. Buffett

Warren Buffet is paying for Burlington Northern in cash and stock. The number of shares he will need to issue will depend on the price of Berkshire Hathaway in the "pricing period" before the deal closes. The higher the share price of Berkshire, the less stock Mr. Buffet will need to issue. The following press release was issued shortly before the pricing period and the stock price promptly skyrocketed.

On January 26, 2010, Standard & Poor’s announced that Berkshire Hathaway Inc. will replace Burlington Northern Santa Fe Corporation in the S&P 100 and S&P 500 indices on a date to be announced. Since that announcement we have received several inquiries regarding whether or not Berkshire would be issuing additional shares of its common stock in what is often referred to as an “Index Add” issuance. Berkshire does not intend to issue any additional shares of its common stock other than the common stock it will issue upon the completion of the previously announced acquisition of BNSF.
 If you believe that Warren Buffett issued this press release because he was looking to help indexers, the following Warren Buffet quote comes to mind: "If you don't know who the pansy at the poker table is than its likely you"

4 comments:

Anonymous said...

Why would he? Should he be more concerned about the indexers or his company, stockholders and the value of his gift to the Bill and Melinda Gates Foundation? It's not clear to me why any company would issue index shares.

Tsachy Mishal said...

You are right. But most CEOs dont issue press releases to say they won't issue shares. That was clearly a tactic to raise the share price.

Since when does Mr. Buffett issue press releases to respond to rumors? Please find one other ocassion.

Anonymous said...

You're right on that count, of course. How often are index shares actually issued? Somehow I had the feeling from the article I read that it was common.

Tsachy Mishal said...

Once in a while. However, this is the first time I have seen a press release saying that index shares will not be issued.