Buffett Death Arb

[blainehodder]

This is a morbid post, but I believe it will play out eventually.  I think one of Buffett's greatest skills is selecting people.  Also, the Berkshire portfolio is obviously rock solid.  Therefore, I think Berkshire has a great future even when Buffett is no longer at the helm.

 

BUT...when he dies, I am sure the stock will tank.  Will Buffett's eventual death generate a massive opportunity to deploy into Berkshire?  Do you think Buffett has instructed Ted and Todd to take advantage of "death arb" price drop?  Will you be a big buyer after Buffett is gone (which is hopefully a long way off)?

 

How big of an impact on the stock do you think it will have?  Obviously a drop from 1.8 times book to 1.5 times book isn't the same as 1.2 dropping to 1 or something crazy, but I think an opportunity will arise.

 

I'm sure Buffett would have a good laugh at this post.  This would be a good topic/question for the shareholder meeting.

 

 

 

 

 

[jay21]

If the stock tanks, it will be a good opportunity.  Question:  Could there be some discount already applied to the stock due to Buffet's impeding "retirement"?

[ragnarisapirate]

I am to the point that from where this is so widely discussed (and seemingly, accepted as a fact that there will be a drop as a result of his death), that I am starting to think that there WON't be a significant drop in the share price. Sure, there will be one after his death at some point, just because that's how stocks work... Look at Apple. When Steve Jobs died, the stock didn't really go down- it may have been below that point for a week (which was well after the fact), but only by a very few percent at most.

 

I mean, really... does anyone not expect him to die? Buffett himself has been talking about it for years... It's almost like he is a tortured artist or something. At this point, are there any shareholders that aren't relatively value based? If so, shouldn't they be comfortable with the succession plan by now?

 

The talk of this being discounted in is a good point... After all, the markets are generally predictive.

[Guest longinvestor]

Should the stock price drop precipitously on Warren's passing, count me as one shareholder who will go "all in", meaning sell everything else and buy BRK. I suspect, there will be other shareholders like me. Plus the board will not be sitting tight, knowing there is GUC buy order out there for 120% of BV. All will be well as BRK will get over the hump and continue on the journey of growing IV with ownership in the hands of a smaller bunch of long term holders.

 

I hope Warren lives much longer, even better, keep sharing his wisdom and doing more for the larger good for a long time. Watch out, Metusaleh!

[Hielko]

I don't think this event will generate a big buying opportunity. See for example Steve Jobs @ Apple. Might be a smallish drop if it's unexpected early (say tomorrow).

[value-is-what-you-get]

WEB said this to an interviewer who asked him for a stock tip.  He said he doesn' t give tips and then after a pause said here's one for you.  The day my death is announced, buy Berkshire.

[Palantir]

Stock should be expected to tank only if his death is "unexpected". Is it unexpected?

 

I bet it surges to 400B after his death, and then crashes, with everybody claiming it was a one man show after all despite excellent performance.

[Zorrofan]

Should the stock price drop precipitously on Warren's passing, count me as one shareholder who will go "all in", meaning sell everything else and buy BRK. I suspect, there will be other shareholders like me. Plus the board will not be sitting tight, knowing there is GUC buy order out there for 120% of BV. All will be well as BRK will get over the hump and continue on the journey of growing IV with ownership in the hands of a smaller bunch of long term holders.

 

I hope Warren lives much longer, even better, keep sharing his wisdom and doing more for the larger good for a long time. Watch out, Metusaleh!

 

WEB once said that he would be disappointed if the share price didn't drop with his "retirement" but given that BRK now has a share buyback program in place how deep or long would any drop last? not long IMHO.....

 

cheers

Zorro 

[twacowfca]

WEB said this to an interviewer who asked him for a stock tip.  He said he doesn' t give tips and then after a pause said here's one for you.  The day my death is announced, buy Berkshire.

 

Yup. That was first said before the share repurchase announcement up to 110% of BV in September, 2011.  I think Warren and the BRK BOD had prearranged to have a share repurchase announcement read upon the announcement of his death.  Now, with the most recent repurchase threshold at 120% of BV, there is less room for a big bounce.  Warren has recently stated that BRK's IV is definitely more than 120% of BV, but he wasn't sure one could say that BRK was definitely undervalued at 130% of BV or 135% of BV.  Therefore, upon his death, I would expect a raise of the repurchase threshold to be up to no more than 125% to 129% of BV or perhaps prearranged to be at the closing price on the day before that announcement.