Why is Warren Buffett against a stock split for Berkshire Hathaway?

Why Does Buffett Oppose Splitting Berkshire Hathaway?

As Chairman of Berkshire Hathaway, Warren Buffett has clearly expressed his opposition to stock splits in multiple shareholder letters. He believes stock splits create no real value for the company or shareholders and may instead bring negative consequences. The main reasons are:

1. Attracting Long-Term Investors Over Short-Term Speculators

• Buffett wants Berkshire shareholders to be investors who understand the company's intrinsic value and are committed to long-term ownership. The high stock price (e.g., hundreds of thousands of dollars per share) naturally attracts such investors by raising the entry barrier, reducing participation from short-term traders and speculators.
• A stock split would lower the share price, potentially drawing more short-term speculators. This could increase price volatility and distort the shareholder base. Buffett emphasizes in his letters that he prefers "high-quality" shareholders over merely increasing shareholder numbers.

2. Splits Create No Real Value

• Buffett views stock splits as an "accounting gimmick" or "marketing tactic"—akin to tearing a banknote in half without increasing total value. He argues splits merely alter share denomination and quantity without enhancing the company's profitability or intrinsic worth.
• In his 1998 shareholder letter, he stated unequivocally: "We will not split our stock because it would do nothing for our shareholders."

3. Avoiding Unnecessary Trading Costs and Volatility

• Post-split, an influx of retail investors could increase trading volume and amplify price swings. This contradicts Berkshire’s identity as a long-term value-focused enterprise.
• Buffett notes that high share prices help maintain a stable shareholder base, insulating the company from short-term market sentiment.

4. Historical Case and Exception

• Berkshire’s only split occurred in 2010 for Class B shares (a 50-for-1 split) to facilitate the acquisition of Burlington Northern Santa Fe Railroad. This was not a routine split but driven by specific transactional needs.
• Buffett has repeatedly stressed that Class A shares will not be split barring exceptional circumstances, preserving the company’s core principles.

In summary, Buffett’s opposition stems from his commitment to value investing. He aims for Berkshire to be owned by rational, long-term investors rather than becoming a target of market speculation. This philosophy is detailed across multiple shareholder letters (e.g., 1983, 1998, and 2010).