1996: How will the class B share offering affect book value?

AUDIENCE MEMBER: My name is Bob McClure (PH). I live in Singapore.

And the way I figure it, the sale of the B shares at the price they will probably be sold, will give an immediate boost to the book value of Berkshire Hathaway. So, as far as I’m concerned, the more the merrier.

Can you give us your thinking on that, the accounting treatment, how this will affect the book value of Berkshire?

WARREN BUFFETT: Well, any sell — shares we sell at the equivalent per A share of in the range of 33,000 or thereabouts, where the stock is selling now, will increase the book value per share.

But that does not mean it increases the intrinsic value per share.

I’ve said many times in the report, we use book value as a proxy in tracking movement of intrinsic value. But it does not represent anything like intrinsic value per share.

And the key is not what it does to book value per share, but what it does to intrinsic value per share. And, you know, we believe the intrinsic value is materially higher than the book value.

We don’t spoil your fun by ever giving you a number. But — (laughter) — we do not regard the fact that it increases the book value per share as being any kind of a determinant in deciding to issue the shares.

But it will have that consequence mathematically. The key is the relation to intrinsic value.