Warren Buffett Will Give Away His Entire $140 Billion Berkshire Stake by 2034

One of the wealthiest people in America is about to give away (almost) his entire fortune. Warren Buffett, legendary investor and longtime CEO of Berkshire Hathaway (BRKA 0.34%)(BRKB 0.42%), announced on Tuesday that he will donate his entire $140 billion of Berkshire stock to charity.

Let’s look at why Buffett’s stock donations are a big deal, and whether they could affect Berkshire shareholders.

How will Warren Buffett’s stock donations work?

In a news release on July 14, Buffett announced that he was converting 8,000 Berkshire Hathaway Class A shares into 12 million Berkshire Hathaway Class B shares. That’s a ratio of about 1,500 Class B shares per Class A share.

Out of those 12 million Class B shares, he donated:

• 9 million shares to the Susan Thompson Buffett Foundation (named for his late wife)
• 1 million shares to the Sherwood Foundation (managed by his daughter, Susie)
• 1 million shares to the Howard G. Buffett Foundation (managed by his son, Howard)
• 1 million shares to the NoVo Foundation (managed by his son, Peter)

Based on the July 13 closing prices of $496.85 per Berkshire Hathaway Class B share and $744,850 per Class A share, Buffett’s donation of 12 million Class B shares was worth about $5.96 billion. Following those donations, Buffett still owns 1,162 Class B shares (worth about $577,340) and 188,290 Class A shares (worth about $140.25 billion).

In the news release, Buffett also announced, “My goal is to dispose of all of my Berkshire shares within about eight years” — by Dec. 31, 2034.

Will Buffett’s donations hurt Berkshire’s stock price?

Buffett deciding to donate his Berkshire shares should not be considered a bullish or bearish signal for the future of the company’s stock price. He’s not selling the shares; he’s just transferring them to a new owner. Buffett’s philanthropic donations are unlikely to cause any major changes in Berkshire’s share price.

And even if Buffett were selling all 12 million of those Class B shares, that would amount to only about 0.85% of the company’s 1.4 billion shares outstanding. That’s not a big enough shift in volume to drive down the share price.

Berkshire Hathaway shareholders ought to be more concerned about the company’s long-term underperformance compared to the S&P 500 index. In the past 10 years, the S&P 500 has delivered total returns of 314%, while Berkshire has delivered gains of about 235%.

BRK.B Total Return Level data by YCharts

Buffett is one of the most successful investors of all time, and his philanthropy is a generous capstone to his career. But it’s not necessarily bad news for Berkshire Hathaway shareholders. Instead of worrying about the effects of Buffett’s $140 billion of stock donations, shareholders should hope that new CEO Greg Abel can deliver some stronger future gains.