The Board of Directors today “authorized Berkshire Hathaway to repurchase Class A and Class B shares of Berkshire at prices no higher than a 10% premium over the then-current book value of the shares.” “In the opinion of our Board and management, the underlying businesses of Berkshire are worth considerably more than this amount”.
As of June 30, 2011, Berkshire’s latest filing, its Class A shares had a book value of $98,716, while its Class B shares had a book value of $65.81. This repurchase program was announced by Berkshire prior to the market’s open today. At the close of trading today, the Class A shares were at $108,449 (+ 8.10% for today) and the Class B shares were at $72.09 (+ 8.62%). At these closing prices, the Class A and Class B shares are approximately 10% above their book value as of June 30. Assuming the book value of these shares are unchanged since June 30 (lower prices for Berkshire’s equity portfolio offset by nearly three months of profits from its businesses), they are now priced at the upper end of where Berkshire currently would be willing to purchase its shares.
It is not known whether, or how many shares, may have been purchased by Berkshire today. This repurchase program effectively sets a floor under Berkshire’s stock price at today’s closing price. Since Berkshire states that its shares are considerably undervalued at their current level, there appears to be substantial upside potential to these shares.