2019: Will Berkshire be more vulnerable to activist investors in the future?
BECKY QUICK: This question comes from Stuart Boyd (PH), who’s a chemical engineer from Australia.
He says, “Currently Berkshire would be incredibly difficult for an activist investor to target, because number one, Warren, your ownership stake is large. Number two, shareholders appreciate the business is more valuable operating under the Berkshire umbrella rather than being sold off in pieces.
“And number three, the sheer size or market capitalization of Berkshire is an entry barrier for most activist investors.
“Warren and Charlie, after your ownership has been completely distributed, will Berkshire be more vulnerable to activist investors? I’m guessing this isn’t something that keeps you up at night, but thought it was worth asking.”
CHARLIE MUNGER: No, it’s going to happen quite a few decades after my death.
WARREN BUFFETT: Yeah. It —
CHARLIE MUNGER: I don’t think I’ll be bothered much by it. (Laughter)
WARREN BUFFETT: No, anything could happen. It’s a low probability. It can’t happen for a lot of years, in terms of the way my stock gets distributed and in terms of the way other stock is held.
But in the end, Berkshire should prove itself over time. I mean, there are no perpetuities. And it deserves to be continued in its present form. It has a lot of attributes that are maximized by being in one entity, which people don’t fully understand.
I think if you spin off something that would command a high PE that therefore value has been unlocked, which is totally nonsense. I mean, it’s already built in.
One day out, you know, you might have an extra 3 percent or 5 percent in price, but over the years, we want to keep the wonderful businesses.
But eventually I think the culture will remain one of a kind. I think that we will be able to do things other people can’t do.
I think that the advantages of having them in one spot will likely be significant over time. And if that happens, then no activist is going to take it over.
And if the model doesn’t work for some reason over a long period of time, then something else should happen. Charlie?
CHARLIE MUNGER: Nothing more.
WARREN BUFFETT: OK.