Key Points
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On July 14, Warren Buffett announced a donation of about $6 billion worth of Berkshire Hathaway shares to his family’s charitable foundations.
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The legendary investor intends to donate the remaining $140 billion of his shares to charity by Dec. 31, 2034.
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One of the wealthiest people in America is about to give away (almost) his entire fortune. Warren Buffett, legendary investor and longtime CEO of Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB), announced on Tuesday that he will donate his entire $140 billion of Berkshire stock to charity.
Let’s look at why Buffett’s stock donations are a big deal, and whether they could affect Berkshire shareholders.
How will Warren Buffett’s stock donations work?
In a news release on July 14, Buffett announced that he was converting 8,000 Berkshire Hathaway Class A shares into 12 million Berkshire Hathaway Class B shares. That’s a ratio of about 1,500 Class B shares per Class A share.
Out of those 12 million Class B shares, he donated:
- 9 million shares to the Susan Thompson Buffett Foundation (named for his late wife)
- 1 million shares to the Sherwood Foundation (managed by his daughter, Susie)
- 1 million shares to the Howard G. Buffett Foundation (managed by his son, Howard)
- 1 million shares to the NoVo Foundation (managed by his son, Peter)
Based on the July 13 closing prices of $496.85 per Berkshire Hathaway Class B share and $744,850 per Class A share, Buffett’s donation of 12 million Class B shares was worth about $5.96 billion. Following those donations, Buffett still owns 1,162 Class B shares (worth about $577,340) and 188,290 Class A shares (worth about $140.25 billion).
In the news release, Buffett also announced, “My goal is to dispose of all of my Berkshire shares within about eight years” — by Dec. 31, 2034.
Will Buffett’s donations hurt Berkshire’s stock price?
Buffett deciding to donate his Berkshire shares should not be considered a bullish or bearish signal for the future of the company’s stock price. He’s not selling the shares; he’s just transferring them to a new owner. Buffett’s philanthropic donations are unlikely to cause any major changes in Berkshire’s share price.
And even if Buffett were selling all 12 million of those Class B shares, that would amount to only about 0.85% of the company’s 1.4 billion shares outstanding. That’s not a big enough shift in volume to drive down the share price.
Berkshire Hathaway shareholders ought to be more concerned about the company’s long-term underperformance compared to the S&P 500 index. In the past 10 years, the S&P 500 has delivered total returns of 314%, while Berkshire has delivered gains of about 235%.
BRK.B Total Return Level data by YCharts
Buffett is one of the most successful investors of all time, and his philanthropy is a generous capstone to his career. But it’s not necessarily bad news for Berkshire Hathaway shareholders. Instead of worrying about the effects of Buffett’s $140 billion of stock donations, shareholders should hope that new CEO Greg Abel can deliver some stronger future gains.
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Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
