BRK.B versus BRK.A wtf?

Discussion in 'Trading' started by EricP, Feb 20, 2009.

  1. EricP


    BRK.B is supposed to be 1/30th of BRK.A. The A shares are convertable to the B shares at a 30x conversion, which ensures that the B shares never trade at a premium. Instead, the B shares typically trade at a 1-3% discount the A shares.

    In the last week, however, the B shares have plummeted and now trade at almost an 10% discount, versus only 1% discount on a few days ago on Tuesday's close. WTF?

    Anyone have any idea on the reason for this? This is a massive change in just a few days, and seems like it must be more than just liquidity related. Any know?
  2. there's a saying... you get what you pay for
  3. It's a one way conversion. BRKA converts to 30 BRKB, not the other way around, but the gap is usually much narrower as you have observed. If one were up for a spin one could buy lots of 30 BRKB and short one BRKA for each lot of 30 BRKB. I'm not giving advice, just making an observation.
  4. 1) "Smaller" investors may be rushing into and out of BRKB causing fluctuation in it's relationship to BRKA, which is likely to be more "stable" because of its higher price.
    2) There may be some aggressive pairs-trading between BRKB and the major underlying components separate from BRKA.
    3) Buffett, himself, may be capitulating at the exact bottom. :cool: