Professor Elam

Warren Buffet already owned 20% of Burlington Northern, why did he buy the rest?

One reason for this blog is to go behind the headlines and link what we study in the classroom with the real world. I posed this question to the Intermed II class last night, indeed, why?  The answer is that he will literally own the earnings of BNI as Berkshire will account for it as a consolidation. The earnings of BNI will become earnings of Berkshire. This will boost the bottom line of Berkshire as well as their cash flow. 

AS you read the article note that he will then have a 50 to 1 split of BRK.B, the lower priced shares. The split will not change the equity of BRK but will change the price to below $100. The purpose will be to make the shares easier to purchase and gain a wider group of stockholders.