For the first time in its history, Berkshire Hathaway (BRKB) will buy back its own shares, the company announced this morning. The company says the shares are trading at a significant discount to the firm’s intrinsic value, a metric value investors use to describe the supposed real worth of a company. The move sent shares 5.5% higher early.
“In the opinion of our Board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise. If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares, benefiting shareholders who retain their interest.”
Berkshire said it will buy the shares “at prices no higher than a 10% premium over the then-current book value of the shares.” The company did not say how many shares it expects to buy, just that it won’t allow its cash equivalent balance to fall below $20 billion.
“The repurchase program is expected to continue indefinitely and the amount of purchases will depend entirely upon the levels of cash available, the attractiveness of investment and business opportunities either at hand or on the horizon, and the degree of discount from management�s estimate of intrinsic value. The repurchase program does not obligate Berkshire to repurchase any dollar amount or number of Class A or Class B shares.”
The move could also signal that Berkshire, which has been on the hunt for acquisitions, has not found any other companies worth buying.
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