The story behind Berkshire Hathaway – Global

Thanks to the rise in the Berkshire Hathaway share price, Warren Buffett has officially joined the $ 100 billion club. At 90, Buffett joins the respected gang, which also includes Jeff Bezos, Bill Gates and Elon Musk. Buffett is now well-known and one of the richest men in the world, but few know the story behind the beginning of Berkshire Hathaway. Why did Buffett choose Berkshire to be his holding company?

The young Buffett bought the first shares of Berkshire in 1962. At that time, the company was engaged in the textile field, and as a result of the difficulties of the industry, the company was forced to close factories. The closure of the factories contributed to the release of capital, which the company used to repurchase shares.

Buffett understood of course that Berkshire was a bad business in a bad industry, but the share price was very attractive in his opinion. He decided to buy Berkshire shares, expecting to be able to sell them at a profit to the company. After a while, the Berkshire management did ask Buffett at what price he would sell his shares to the company. Buffett replied that he would be willing to sell all of his shares at a price of $ 11.5 per share, and this is where the interesting story began.

After a few months, the company announced another takeover bid for the company’s stock, with the offer price set at $ 11,375 per share. Buffett was furious that the chairman, who was aware of the price Buffett was asking, offered an amount lower than $ 0.125 per share. As a result of the company’s chairman’s insistence on making an offer that offended Buffett but did not have great economic significance for the company, And because of Buffett’s ego, the story of Berkshire Hathaway we know today began.

Buffett continued to acquire more and more shares of the company, until mid-1965, The point at which he actually gained control of the company. Once control of the company was achieved, Buffett replaced the company’s management. Because the textile business was a bad business, Buffett allocated the capital he was able to extract from the textile business to acquisitions of insurance companies and other companies, and so the snowball began to roll up to the holding company worth over $ 600 billion.

In retrospect, Buffett has admitted several times that Berkshire itself has not been his successful investment. The motives for the investment were wrong – a combination of ego and revenge. Buffett could have easily invested the money in another, better company, and from it built his own holding company. One of the things that affected Buffett at the time was the proximity of the date of the proposal for his father’s death. The company’s offer to buy Buffett’s shares at the low price came just about a week after his father passed away. His father was a major figure in his life, and it is possible that this event influenced his judgment.

Despite the “mistake”, after 56 years of controlling Berkshire, it is clear to everyone that Buffett has been commercially successful. Buffett has long been ranked as one of the richest people in the world, with equity that crossed the $ 100 billion mark. Berkshire Hathaway – one of the largest companies on Wall Street – will continue to be a strong and profitable company even after the Buffett era and its partner Charlie Manger who celebrated 97.

Amit Shamir, CEO and partner in the Kepler Capital hedge fund.