Buffett buyback rules signal views on share value
Berkshire Hathaway chief executive Warren Buffett told investors in a note that he favors buying back shares at a higher price under specific conditions, signaling that he views Berkshire Hathaway shares as undervalued. (June 5, 2012) Credit: AP
Berkshire will pay as much as 120 percent of book value, a measure of assets minus liabilities, the Omaha, Neb-based company said Wednesday in a statement. The limit was 110 percent. Buffett's company repurchased 9,200 Class A shares for $131,000 each from the estate of a longtime shareholder, the company said in the statement.
Buffett, 82, and vice chairman Charles Munger have been weighing buybacks as the company seeks to deploy part of its $47.8 billion cash hoard. Berkshire last year began a buyback program after shunning repurchases for four decades.
"Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company's intrinsic business value, conservatively calculated," Buffett wrote in his most recent letter to shareholders.
Book value was $111,718 per share as of Sept. 30, the company said in a statement on Nov. 2. The stock climbed 2.2 percent to $133,683 Wednesday morning on Wall Street.
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