Coke Stock Split May Irk Warren Buffett
The mood may sour in the near term, however, as the soft-drink giant seeks approval for a 2-for-1 share split, a contentious topic for the famed billionaire.
Although Buffett has offered harsh words for companies that have considered stock splits and new share issuance, the Oracle of Omaha in recent years has encouraged a split for the Class B shares of Berkshire Hathaway (BRK.B).
A report from Bloomberg notes that Coca-Cola's chairman is pushing for what will be the company's 11th share split. The move is a bid to attract new investors and boost liquidity.
Although the company may be successful in its efforts, the Oracle of Omaha has warned in the past that these types of moves are ultimately detrimental to current shareholders. By flooding the market with excessive new supply, current stakeholders will see their power diluted. In addition, a share split may attract short-term-minded individuals who are not truly interested in the company's long-term prosperity.
Buffett has famously lashed out against other companies in which he held stakes when they have suggested the idea of boosting the availability of their stock.
In 2010, food giant Kraft(KFT) announced its intentions to purchase Cadbury, and the Nebraska native was quick to express his displeasure.
Buffett railed against the $19.5 billion plan. Among his reasons was Kraft's proposal to issue as many as 370 million shares to help pay for the bid.
The investor ended up turning his words into action. In the middle of that year, the public learned that Buffett had slashed his exposure to Kraft, paring back his position by nearly 25%.
Interestingly, 2010 was also the year that Buffett pushed for and received shareholder approval to initiate a 50-for-1 share split on the Class B shares of Berkshire. This move was done in order to help Buffett's empire fund its landmark bid for Burlington Northern Santa Fe Railroad . Buffett has called this $34 billion dollar acquisition -- the largest in Berkshire's history -- an "all-in" wager on the U.S. economy that will benefit shareholders for years to come.
With 200 million shares, Coca-Cola is by far Warren Buffett's largest stock holding. As of the end of 2011, the company represented more than one-fifth of the iconic portfolio. Living up to his title as a long-term investor, Buffett has claimed that he has never sold a share of Coke over the years.
The recent discussion of a Coca-Cola share split may irk Buffett from a philosophical standpoint, but I do not believe that it will inspire him to take any dramatic action towards his portfolio.