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Yet Another Reason Not To Sell Your Berkshire Hathaway Shares

by: Felix Salmon June 05, 2008 | about stocks: BRK.A / BRK.B    
Felix Salmon

Felix Salmon

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This is almost certainly the wost investment in Berkshire Hathaway of all time - or, on the flipside, "a pretty unethical way to make a buck". Either unethical or extraordinarily lucky, anyway.

Someone, somewhere, for some reason, had a bid in to buy 50 of Berkshire Hathaway's B shares at just under half the market price. Obviously, no one expects such a bid to be filled. But filled it was - something which can happen when "the day's sell orders burn through other, higher, limit orders, and the brokers aren't actively trading". The result? $115,050 in instant profits for the buyer, and a nasty shock for whomever it was who simply decided to sell his shares without setting a lower limit to the price he was getting.

The really crazy thing is that these are the B shares we're talking about - the shares which were specifically issued by Berkshire Hathway so that there would be something more liquid and tradeable than the wildly expensive A shares. So much for that idea, it would seem.

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This article has 7 comments:

  •  
    Jun 05 11:39 AM
    If you look at order book for most of widely traded stocks, there are orders to buy well under current price and orders to sell well above. Looks like there are people out there who make a buck, sometimes, using this practice. Why is it unethical?
    Reply
  •  
    Jun 05 12:03 PM
    That trade must be a bad print from one of the exchanges - look at the intraday trading in brk.b over the last week - that trade didn't occur.
    Reply
  •  
    Jun 05 12:11 PM
    I saw a similar thing with new and thinly-traded PST a couple days ago. It appears that someone placed a market buy order at open with no active trades occurring; the best ask was 399.99 for a share worth maybe 72. Either 200 shares changed hands at a price more than 5x fair value or this was a bad print. Either way, these anecdotes serve as reminders to investors to be wary of market orders - and market data - in illiquid issues. I find it hard to believe an experienced trader would ever fall victim to such an error but one never knows.
    Reply
  •  
    Jun 05 01:27 PM
    LOL, thats what you get when you offer a market order. Everytime a trader sees a market order on screen the sound "CaaaaChing" must ring in their heads.
    Reply
  •  
    Jun 05 04:53 PM
    I'm with Jay, I don't think that trade ever occured. It does not appear on the "low" quote on Yahoo finance or elsewhere.
    Reply
  •  
    Jun 05 08:01 PM
    Bad print bullshit and somebody acting like they "know something" and tumbling about it.

    There's no evidence of the trade in any intraday data source I've got available. I've also seen enough bad prints intraday in illiquid stocks and ETFs on my watchlist to know that the data providers will correct those mistakes after the close.

    The shame is that so many people picked up on this "BRK-BS" and spread it around.
    Reply
  •  
    Jun 05 11:51 PM
    I have a screenshot on my home computer (sorry, I'm traveling so I can't post it now) from Scottrade of someone buying a LARGE number of BRK.B shares after-hours at HALF the value they trade while the markets are open.

    I could not believe it when I saw this. This was back in January. I've been puzzling about this for a while.
    Reply
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