Berkshire Hathaway Inc.
is trading at more than $ 421,000 per Class A share, and the market is bullish. That is a problem.
The price has grown so high that it has almost reached the maximum number that can be stored in a common exchange computers processing numbers.
temporarily suspended broadcast pricing for Berkshire Class A Shares through various popular data feeds. Such feeds provide real-time price updates for a number of online brokerages and financial websites.
Nasdaq’s computers can only count so high because of the compact digital format they use for communicating prices. The largest number they can handle is $ 429,496.7295. Nasdaq is rushing to complete an upgrade later this month that would fix the problem.
It’s not just Nasdaq. Another exchange operator, IEX Group Inc., said in March that it would stop accepting orders from investors for Class A shares of Berkshire Hathaway “because of an internal price restriction within the trading system.”
It is the stock version of the Y2K bug. And it’s becoming an increasingly pressing issue as shares of Warren Buffett’s company are up more than 20% this year, bolstered by a rising market and a return to profitability after the fallout from the Covid-19 pandemic in 2020.
Here’s the problem: Nasdaq and some other market participants record stock prices in a compact computer format that uses 32 bits or ones and zeros. The greatest possible number is two to the 32nd power minus one, or 4,294,967,295. Stock prices are often stored to four decimal places, so the highest possible price is $ 429,496.7295.
No other stock is anywhere near the Berkshire Class A stratospheric pricing levels, so it’s understandable why the engineers behind the Nasdaq and IEX systems chose the number format, which programmers call an unsigned four-byte integer.
The U.S. stock with the second-highest share price, home builder NVR Inc., is trading just above $ 5,100 per share. Using compact sizes that take up less memory can make software more efficient, a high priority in the world of electronic stock trading.
At the root of the problem is Mr. Buffett to conduct a stock split of Berkshire’s Class A shares. The 90-year-old billionaire has signed birthday cards to friends with the message, “May your life break up until Berkshire breaks up,” said Fortune magazine. When he pressed the issue, he told stockholders that a lower price would put unaffected short-term investors in the stock.
“I know if we had something that would make it a lot easier for anyone with $ 500 to buy, we would have a lot of people who would buy it without any idea of what they were doing,” he told investors. at Berkshire’s 1995 annual meeting.
Since then, Berkshire has introduced lower-price Class B shares, broadening the company’s investor base. And many brokers now offer fractional trading, allowing investors to buy small slices of Berkshire with just a few extra dollars.
Still, Mr. Buffett has urged not to split Berkshire’s Class A shares.
Berkshire did not respond to a request for comment.
In a warning to customers on Monday, Nasdaq said it would complete an upgrade of its data feeds on May 17 to enable stock prices above $ 429,496.7295. Until then, however, the exchange said it would temporarily suspend publication of the price of stocks that cross 98% of the threshold.
That happened Tuesday, when Berkshire Class A shares closed at $ 421,420.00. A Nasdaq spokeswoman confirmed that the stock had effectively disappeared from affected data feeds, including Nasdaq Last Sale and Nasdaq Basic.
Those feeds are used by brokers such as Robinhood and Webull Financial LLC, according to the brokers’ websites, as well as some online financial news and data providers. That could potentially cause hiccups for investors tracking Berkshire Class A prices if the brokers don’t have a backup source of data available. A Robinhood spokesperson said the brokerage was not affected. Webull declined to comment.
“Data integrity is of paramount importance at Nasdaq,” said a spokeswoman for the New York-based exchange operator, calling the move a temporary measure.
Decades ago, it was unusual for stocks to trade above $ 100 a share. But since then, many executives have followed Mr. Buffett by refusing to split their shares, and today the club includes companies with stock prices in excess of $ 1,000
This has caused consternation among some stock market observers who say the market works better when stock prices are not that high.
James Angel, a professor of finance at Georgetown University who has studied the issue, says such high stock prices result in higher trading costs for investors. Now Berkshire’s extraordinary stock price has forced a time-consuming overhaul of its stock exchange systems, he adds.
“This is just one of the many problems Berkshire poses to many others through their refusal to split,” said Mr. Angel.
Still, the professor is quick to emphasize his respect for Berkshire’s longtime director. “I’m a big fan of Warren Buffett,” said Mr. Angel. ‘I always quoted him at least twice a day. But I disagree with him on this point. “
Write to Alexander Osipovich with email@example.com
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