Subject: Re: A and B share price spread
A's $497,000
B's $319

497,000/1500 = $331

Approximately 10% difference between B trading price and the 1/1500 value.

Are A's priced rich, or, are B's a 10% bargain?

Is this an arbitrage opportunity presented?

m


Not a pure arbitrage, since they are not convertible in the direction you would need to capture the spread. But if you had some A-shares in a tax deferred account (or live in Monaco) you could sell the A-shares and buy an equal dollar amount of B-shares with the proceeds. I do this fairly often with another company that has non-convertible A and B shares and the back and forth has increased returns in the tax free accounts I can do that in (compared to the taxable accounts I can't do it in). If you don't have any of the A-shares to sell tax free, it may be possible to short some A-shares against your B-share position and "hope" the spread narrows. That's not a pure arbitrage and you will need to consider the holding costs of the trade and the risk that the spread blows out wider. Personally I wouldn't bother with shorting BRK.A. I think the market for BRK.A can be distorted by the low volume (which is much lower than the reported volume since the advent of "fractional share" trading.