 "Ajit Jain has sold half his stake in Buffett's Berkshire. But why?")
Ajit Jain, Vice Chairman of Berkshire Hathaway and a key lieutenant to Warren Buffett, has sold more than half of his stake in the company, according to a regulatory filing dated September 9. The move, which raised $139 million, comes in the wake of Berkshire’s market capitalisation surpassing $1 trillion for the first time.
The Securities and Exchange Commission (SEC) filing reveals that Jain sold 200 of his Class A shares at an average price of $695,418 per share. This divestiture represents approximately 54 per cent of Jain’s total holdings in the conglomerate, according to Moneycontrol.
Following the sale, Jain retains only 61 Berkshire shares. Family trusts under his and his wife, Indirma Jain’s names, hold an additional 55 shares, while the non-profit Jain Foundation Inc. possesses 50 shares.
Jain’s philanthropic efforts have seen him donate a significant portion of his stock to the foundation, which focuses on researching dysferlinopathy, a rare form of muscular dystrophy affecting his son. The foundation estimates the disorder affects fewer than eight people per million, according to Financial Times.
Why did Ajit Jain sell the shares?
While the timing of the sale may appear sudden, there could be strategic reasons behind Jain’s decision. David Kass, a finance professor at the University of Maryland’s Robert H. Smith School of Business, was quoted by CNBC International as saying, “This appears to be a signal that Ajit views Berkshire as being fully valued.”
Impact Shorts
More ShortsIn other words, he might have thought the value of Berkshire Hathaway shares might have peaked out, and that there wouldn’t be a better time to cash in his shares and book profits than when he did it.
That could be in line with Buffett’s own assessment of where Berkshire Hathaway’s share might go.
No ’eye-popping’ performance
In his annual letter to shareholders this February, Buffett warned that Berkshire Hathaway’s future returns may be more tempered. The conglomerate, valued at $905 billion at the time, faces “virtually no possibility of eye-popping performance” in the coming years, Buffett wrote.
Buffett did say that Berkshire should continue to “do a bit better” than the average US company, but tempered any enthusiasm by adding that “Anything beyond ‘slightly better’, though, is wishful thinking.”
On Thursday (September 12) Berkshire Hathaway shares closed at $453.17.
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