Will Warren Buffett Be Upset By Coca-Cola’s Stock Split?

Coca-Cola shareholders just approved a two-for-one stock split this past Tuesday, and this is going to increase the number of shares available to 11.2 billion. The company has not split their stock in 16 years, and it’s only the 11th time that they have done this throughout their 92 year history on the stock market.

Coca-Cola recently stated in their company release that “[t]he record date for the stock split is expected to be July 27, 2012, with new shares expected to be distributed on or about Aug. 10, 2012. Each shareowner of record on the close of business on the record date will receive one additional share of common stock for each share held.”

The one investor who might find himself a little bit annoyed with the two-for-one split is none other than Warren Buffett. His company, Berkshire Hathaway, already has a grand total of 200 million shares of Coca-Cola that total in worth of over $15 billion. They’re actually the largest holding of Berkshire Hathaway, and it is widely known that Berkshire owns a total of 8.84% of Coca-Cola. This fact was recently reported by CNBC.

Buffett, when speaking about his confidence in the Coca-Cola company, told CNBC, “I’ve had a relationship with Coke for over 70 years. . .Today we own 200 million shares. We’ve never sold a share of Coca-Cola.”

Many people are wondering if Berkshire Hathaway will finally sell off some of their shares of Coke now that the stock is going to split. It’s common knowledge that Buffett has always been a strong detractor of stock splits because he feels that they are bad for the investors. The reason why is because he says they will dilute the power of the shareholders, and he also believes that stock splits will also attract investors who are only there for a short term gain. Buffett mainly likes his Berkshire Hathaway shareholders to look at their stock in the company as a business owner, and who are willing to invest in their company for the long-term.

In a 1983 letter to Berkshire Hathaway shareholders, him Mr. Buffett wrote: “Could we really improve our shareholder group by trading some of present clear-thinking members for impressionable new ones who, preferring paper to value, feel wealthier with nine $10 bills than with one $100 bill?”

Buffett was actually a member of Coca-Cola’s board during three of the stock splits. He even split his Berkshire Hathaway B shares 50 to 1 in the year 2010. He did that because his split encouraged Burlington North investors to convert their current holdings a lot more into Berkshire Hathaway shares. There is an article in Bloomberg where Howard Buffett commented on his father’s opinion of stock splits, stating that his father has “one opinion about how Berkshire should handle a stock split and another about how Coke would handle it.”

Buffett also wrote about Coca-Cola in his letter to the shareholders in 2010. He said that “In 2011, we will almost certainly receive $376 million from Coke, up $24 million from last year. Within ten years, I would expect that $376 million to double.”

Coca-Cola shares, at the time of this writing, were trading for $78.12. This is up 0.18% from Monday’s close of the market.

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