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Berkshire Hathaway’s stock price is too high for a computer

Berkshire Hathaway Co., Ltd.

The market is optimistic, trading at over $ 421,000 per Class A share. That’s a problem.

The price has become so high that the replacement computer has almost reached the maximum number that can be stored in one common way of processing numbers.

on Tuesday,

Nasdaq Co., Ltd.

We have temporarily suspended the broadcast price of Berkshire Class A shares on some popular data feeds. Such feeds provide real-time price updates to many online brokerage and financial websites.

Nasdaq computers can be counted very high due to the compact digital format used to convey prices. The maximum number they can handle is $ 429,496.7295. Nasdaq is in a hurry to complete an upgrade that resolves the issue later this month.

It’s not just NASDAQ. Another exchange operator, IEX Group Inc., said in March that it would stop accepting investors’ orders for Berkshire Hathaway Class A shares “due to internal price restrictions within the trading system.”

This is the year 2000 issue stock market version. And with Warren Buffett’s stake rising more than 20% this year, supported by market rises and a recovery in profitability after dropping out of the Covid-19 pandemic in 2020, it becomes an increasingly urgent issue. It’s on the way.

New York Stock Exchange on December 31, 1999. The turning point of the millennium brought fear of the year 2000 problem.


Photo:

Associated Press

The problem is: Nasdaq and other market operators record stock prices in a compact computer format that uses 32-bit or 1s and 0s. The maximum number possible is 2 to the 32nd power minus 1, or 4,294,967,295. Stock prices are often stored with four decimal places, so the highest possible price is $ 429,496.7295.

No other stock is close to the Berkshire Class A stratospheric price level, so it’s understandable why the engineers behind the Nasdaq and IEX systems chose a numeric format that programmers call 4-byte unsigned integers.

Homebuilder NVR Inc, the second-highest-stocked US stock. Is trading at a level just above $ 5,100 per share. A compact format that consumes less memory can make your software more efficient and a high priority in the world of electronic stock trading.

At the root of the problem is Buffett’s refusal to carry out a stock split of Berkshire’s Class A shares for decades. According to Fortune magazine, 90-year-old billionaire signed a birthday card to a friend with the message, “You can live until Berkshire splits.” When faced with this problem, he told shareholders that lower prices would bring unsophisticated short-term investors to equities.

“If a $ 500 person has something much easier to buy, so many people who don’t have the most subtle thoughts about what they’re doing will buy it. I know, “he told investors at the 1995 Berkshire Annual Meeting.

Since then, Berkshire has expanded its investor base by introducing lower-priced Class B shares. And now, many brokers offer fractional trading, allowing investors who can afford just a few dollars to buy small slices of Berkshire.

Still, Buffett insisted not to split the shares of Berkshire Class A.

Berkshire did not respond to a request for comment.

Warren Buffett was at Berkshire Hathaway’s 2012 Annual General Meeting of Shareholders. He refused to split the company’s Class A shares.


Photo:

Daniel Acker / Bloomberg News

Nasdaq said in a warning to customers on Monday that it would end the data feed upgrade on May 17 and allow stock prices to exceed $ 429,496.7295. However, until then, the exchange has announced that it will temporarily suspend the disclosure of stock prices above the threshold of 98%.

It happened on Tuesday when Berkshire Class A shares closed at $ 421,420.00. A Nasdaq spokeswoman confirmed that the shares were virtually extinguished from affected data feeds such as the Nasdaq Last Sale and Nasdaq Basic.

According to the broker’s website, these feeds are used by brokers such as Robin Hood and Webull Financial LLC, as well as some online financial news and data providers. If the broker does not have a backup source of available data, it could potentially cause problems for investors who monitor Berkshire Class A prices. A Robin Hood spokesman said the brokerage firm was unaffected. Webull declined to comment.

A spokeswoman for a New York-based exchange operator said, “Data integrity is paramount in Nasdaq,” calling the move a temporary measure. A New York Stock Exchange spokesman, who is listed on Berkshire and handles many of the company’s Class A-share transactions, said the NYSE system would not be affected by the issue.

Decades ago, it was unusual for any stock to trade in excess of $ 100 per share. But since then, many executives have refused to split the stock, following Buffett’s leadership. Currently, clubs for companies with stock prices above $ 1,000 include:

Alphabet Co., Ltd.

Amazon.com Co., Ltd.

And

Chipotle Mexican Grill Co., Ltd.

It has caused astonishment among some stock market observers who say the market works better when stock prices are not so high.

Chipotle Mexican Grill Inc. is one of the companies with a stock price of over $ 1,000.


Photo:

David Paule Maurice / Bloomberg News

James Angel, a professor of finance at Georgetown University who studied the issue, said such a rise in stock prices would lead to higher transaction costs for investors. Currently, Berkshire’s oversized stock has forced a time-consuming review of its stock market system, he added.

“This is just one of the many problems Berkshire poses to many others by refusing to split its shares,” Angel said.

Still, the professor immediately emphasizes his respect for Berkshire’s longtime CEO. “I’m a big fan of Warren Buffett,” Angel said. “I quoted him at least twice a day, but this is one of the areas I disagree with him.”

Write to Alexander Osipovich alexander.osipovich@dowjones.com

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Berkshire Hathaway’s stock price is too high for a computer

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