Berkshire Hathaway's Share Divergence: Governance, Value, and the Future of a Split Structure

Berkshire Hathaway's recent divergence in Class A (BRK.A) and Class B (BRK.B) share prices has sparked debate among investors. While BRK.A surged 1% in the final minutes of a Thursday trading session, BRK.B dipped—a rare departure from their historically synchronized movements. This anomaly, coupled with broader divergences in weekly and monthly performance, raises critical questions about the company's governance structure and its alignment with long-term shareholder value.

Governance as the Linchpin of Shareholder Value

Warren Buffett's corporate governance philosophy is deeply embedded in Berkshire's DNA. The board, composed of 13 members including Buffett (Chairman/CEO) and independent directors like Susan Decker, emphasizes long-term value creation, operational discipline, and ethical leadership. Recent governance updates—such as the age-80 re-election cap for directors and the lead independent director role—reflect a strategic shift toward institutionalizing continuity. Yet, the split-share structure complicates this framework.

BRK.A and BRK.B differ in voting rights (1:1/10,000) and price, creating distinct investor bases. Institutional investors often favor BRK.A for its voting power and liquidity, while retail investors opt for BRK.B. This duality raises a key question: Does the split structure still serve long-term investors in an era of divergent price dynamics?

Analyzing the Divergence: Liquidity, Sentiment, or Governance?

The recent divergence cannot be explained by traditional metrics alone. Over the past week, BRK.A fell 0.96% while BRK.B dropped 0.87%. Over the past month, BRK.A declined 2.20% versus BRK.B's 2.86%—a widening gap. Technical traders point to exhaustion patterns and Fibonacci retracements, but structural factors loom larger.

1. Liquidity Disparities: BRK.A's $719,850 price tag makes it less liquid than BRK.B's $474. Short-term traders may exploit this by arbitraging the two classes, particularly in volatile macroeconomic environments.
2. Governance Signals: Buffett's recent emphasis on “economic moats” and disciplined capital allocation under Greg Abel's leadership may subtly influence investor sentiment. For instance, Abel's energy-sector bets (e.g., Occidental Petroleum) could disproportionately affect BRK.A holders, who often prioritize long-term strategic alignment.
3. Shareholder Rights: The 1/10,000 voting ratio for BRK.B dilutes its influence, potentially creating misaligned incentives. If BRK.B shareholders feel underrepresented, their voting behavior could diverge from BRK.A holders—a governance risk for Berkshire.

Strategic Implications: Capital Allocation and Control

The split structure's primary purpose—preserving Buffett's control—remains intact. With Buffett owning ~30% of the voting interest, BRK.A's concentrated voting power ensures continuity in capital allocation. However, the recent $334.2 billion cash hoard and Abel's focus on energy infrastructure suggest a shift toward operational rigor.

For long-term investors, this duality presents opportunities:
- BRK.A Holders: Benefit from governance stability and strategic clarity but face higher price volatility.
- BRK.B Holders: Gain accessibility but may lack influence in major decisions, such as mergers or asset divestitures.

The challenge lies in balancing liquidity with governance. If BRK.A's premium (currently ~150,000x that of BRK.B) continues to widen, it could signal inefficiencies in the split structure—or a market re-rating of Berkshire's governance model.

Investment Advice: Navigating the Divergence

1. For BRK.A Investors: Prioritize governance alignment. Monitor Abel's capital allocation decisions and the board's risk oversight, particularly in energy and rail segments. A 1.2% average post-earnings outperformance (as seen in BRK.B's historical data) suggests patience is rewarded.
2. For BRK.B Investors: Use the lower entry cost to capitalize on Berkshire's long-term moats. However, advocate for governance reforms to enhance voting power, such as reducing the voting differential or introducing proxy voting mechanisms.
3. Arbitrage Opportunities: The recent divergence may create temporary mispricings. For instance, if BRK.A's 1% spike reflects short-term liquidity demand, traders could hedge by shorting BRK.A and buying BRK.B, assuming convergence.

Conclusion: The Future of a Split Legacy

Berkshire's share structure is a governance tool designed to preserve control and long-term value. While the recent divergence highlights liquidity and structural challenges, Buffett's board and Abel's operational discipline provide a buffer against short-term volatility. For investors, the split remains a double-edged sword: it safeguards strategic continuity but may hinder efficient capital allocation.

As Berkshire navigates its transition to Abel's leadership, the key will be observing whether the split structure evolves to reflect modern investor expectations—without sacrificing the governance principles that have defined its success. In the end, the market's verdict on BRK.A and BRK.B will hinge on one question: Does governance still matter more than price?