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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 21944 
Subject: Re: A hypothetical for brk brother Jim,
Date: 04/02/25 7:20 AM
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HOW, can you respond without mentioning that BRKB buying back 100 Billion of Buffett's shares at 1.3 xs BV, would be very accretive to IV, hence, very bullish news?

I did.
I said presumably the price would settle a little higher.

As with any other buybacks, it's nice, but it takes a huge move like this to make much of a difference to value per share. A few billion here or there isn't really worth paying attention to.

Let's imagine you think a share is actually worth 1.6 times book value these days, so $100bn buyback at 1.3 times book would purchase $123bn in value for $100bn in cash, adding $23bn to the total value of Berkshire.
Shareholders' equity is $649bn, so at 1.6 we're assuming the firm is worth $1039bn before the transaction. An increase $23bn is therefore an increase of only 2.2% in total value. Around 11.8% fewer shares outstanding, so value per share would rise by about 15.9%.

The transaction would drop book per share quite a bit because of the $100bn of cash going out the door, so fair P/B would be 1.93 after the transaction (same valuation level as 1.6 before the transaction).
Perhaps a bit less, as there wouldn't be the firepower for an elephant during the next round of market ructions?

Jim
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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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