Understanding Share Splits (And Why Warren Buffett Doesn’t Care About Them)

Pizza split into several pieces.

What Is a Share Split?

A share split is one of those financial terms that sounds more complicated than it actually is. Imagine you own one large pizza cut into four slices. You decide to cut each slice in half. You now have eight slices but it’s still the same pizza. Nothing about the actual amount of food changed, only the way it’s divided.

A share split works the same way. A company takes its existing shares and divides them into more shares. For example, in a 2-for-1 split, one share becomes two. If you held one share worth $1,000, after the split you’d have two shares worth $500 each. The number of shares increases, but the total value of what you own remains exactly the same.

Why Do Companies Split Their Shares?

The main reason is to make the stock appear more affordable. When a company’s share price climbs to the hundreds or thousands of dollars, it can intimidate new or retail investors. A lower share price, achieved through a split, makes the stock look more accessible, even though it hasn’t become any cheaper in real terms.

It’s a form of marketing. It doesn’t change the company’s value or improve your returns. It just alters the optics.

What a Share Split Is Not.

It’s important to be clear on what a share split doesn’t do. It is not a bonus. It is not a dividend. It’s not free money. And it’s not a sign the company is doing particularly well. A share split is entirely cosmetic, it changes how the shares are divided, not the underlying business.

Why Warren Buffett Doesn’t Split Berkshire Hathaway Stock

Berkshire Hathaway’s Class A shares trade at over $600,000 per share. That’s not a typo. Buffett has chosen not to split the stock for a very specific reason: he wants long-term investors, not short-term speculators.

By keeping the share price high, Buffett filters out casual traders and noise. He wants people who view owning Berkshire as a long-term partnership, not a quick flip. In his own words, “We want people to buy Berkshire because they want to be a partner in the business, not because they think they can flip it for a quick profit.”

This strategy aligns with his philosophy of investing in businesses for the long haul. A high share price is a built-in barrier to short-term thinking.

Should You Care About Share Splits?

If you’re serious about building wealth, the answer is no. The price per share should not distract you from the real questions: Is this a good business? Is it run well? Is it growing earnings and generating cash? Is the stock undervalued?

Most brokers now allow you to buy fractional shares, so even a high share price doesn't exclude you from ownership. What matters is the quality of what you’re buying, not how it’s divided.

Share splits do not change a company’s value. They simply change how the ownership is divided. Warren Buffett doesn’t believe in playing optics, and he’s right real investors don’t buy share slices, they buy businesses.

Focus on value. Think long-term. The rest is noise.

Do you own Berkshire Hathaway?

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• No