Buffett had noticed a trading pattern in Berkshire’s stock; when the company would sell off an underperforming mill, it would use the proceeds to buy back stock, which would temporarily boost the stock price. Buffett’s strategy was to buy Berkshire stock each time it sold a mill and then sell the company its stock back in the share repurchase for a small, tidy profit.
But then ego got in the way. Buffett and Berkshire’s CEO had a gentleman’s agreement on a tender offer price. But when the office offer arrived in the mail, Buffett noticed that the CEO’s offer price was 1/8 of a point lower than they had agreed previously.
In an interview with CNBC, Warren Buffet shared: "So I started buying the stock (Berkshire). And in 1964, we had quite a bit of stock. And I went back and visited the management, Mr. (Seabury) Stanton. And he looked at me and he said, 'Mr. Buffett. We've just sold some mills. We got some excess money. We're gonna have a tender offer. And at what price will you tender your stock?' And I said, '$11.50.' And he said, 'Do you promise me that you'll tender it $11.50?' And I said, 'Mr. Stanton, you have my word that if you do it here in the near future, that I will sell my stock at $11.50.'
I went back to Omaha. And a few weeks later, I opened the mail and here it is: a tender offer from Berkshire Hathaway- that's from 1964. And if you look carefully, you'll see the price is $11 and three-eighths. He chiseled me for an eighth. And if that letter had come through with $11 and a half, I would have tendered my stock. But this made me mad. So I went out and started buying the stock, and I bought control of the company, and fired Mr. Stanton. Now, that sounds like a great little morality tale at this point. But the truth is that I had now committed a major amount of money to a terrible business."
But then ego got in the way. Buffett and Berkshire’s CEO had a gentleman’s agreement on a tender offer price. But when the office offer arrived in the mail, Buffett noticed that the CEO’s offer price was 1/8 of a point lower than they had agreed previously.
In an interview with CNBC, Warren Buffet shared: "So I started buying the stock (Berkshire). And in 1964, we had quite a bit of stock. And I went back and visited the management, Mr. (Seabury) Stanton. And he looked at me and he said, 'Mr. Buffett. We've just sold some mills. We got some excess money. We're gonna have a tender offer. And at what price will you tender your stock?' And I said, '$11.50.' And he said, 'Do you promise me that you'll tender it $11.50?' And I said, 'Mr. Stanton, you have my word that if you do it here in the near future, that I will sell my stock at $11.50.'
I went back to Omaha. And a few weeks later, I opened the mail and here it is: a tender offer from Berkshire Hathaway- that's from 1964. And if you look carefully, you'll see the price is $11 and three-eighths. He chiseled me for an eighth. And if that letter had come through with $11 and a half, I would have tendered my stock. But this made me mad. So I went out and started buying the stock, and I bought control of the company, and fired Mr. Stanton. Now, that sounds like a great little morality tale at this point. But the truth is that I had now committed a major amount of money to a terrible business."
No comments:
Post a Comment