It was May 6th, 1964 New Bedford, Massachusetts Warren Buffett’s (Buffett Partnership LTD) owns Seven Percent (7%) of Berkshire Hathaway’s outstanding shares totaling One Million Five Hundred Eighty Three Thousand and Six Hundred and Eighty (1,583,680),a failing textile company was busy seeking outstanding shares from it’s shareholders and while conducting the share negotiations Berkshire’s Management Seabury Stanton made a miscalculation of slighting a young partnership investment manger named Warren Buffett.
What happens next will change the fate of it’s CEO and secure the legendary investors future.
It was a normal day in may 1964 Warren Buffett was a Humble Midwesterner who wore his good faith on his sleeves. Began noticing the markets downward pressure on a little declining Textile Company named Berkshire Hathaway. After some research Buffett briefly meets the CEO at a gathering. The company was closing factories and repurchasing shares on the open market from shareholders as a way to slow it’s Market downward pressure on the Stock Market.
Then CEO Seaborn Stanton of Berkshire Hathaways was a Harvard graduate who’s personality included a passive aggressive smugness when peacocking around. Stanton mailed a share buyback letter to the Buffett Partnership Warren Buffett the Managing Partner of Buffett Partnership Limited has the fortune of selling his stake in Berkshire at a quick profit. Based on the fact Buffett received a letter by Seabury Stanton who manages Berkshire Hathaway was asking Shareholders to SELL back 225,000 class A shares to Berkshire Hathaway Stock at a price point of $11.375 per share. Buffett shares; “Buffett admits he expected the letter from Berkshire’s Stanton and was surprised at the price Seabury Stanton was offering.”
“A SLIGHTED OFFER WARREN BUFFETT COULD NEVER IGNORE”
At the time Warren Buffett had all of his net worth inside Buffett Partnership Limited. And one day during the offering period in 1964 Stanton and Mr. Buffett and had a brief conversation with Buffett asking what price point would Buffett Partnership Limited be willing to sell it’s shares? “Buffett answers $11.50!” Stanton responded, “Fine we have a deal.” So a few days later after the Acceptance by Stanton? Berkshire did a disservice to Stanton and sent a letter to Buffett Partnership Limited offering an Eighth of a Point lower. We don’t know the actual words. However we can assume this slight was anything but honorable. It would cost Seabury Stanton his Company later.
Crediting Business Insider: “Warren Buffett’s entire legacy would’ve been quite different if he had swallowed that eighth of a point ($0.125) discount and just sold. The $11.275 Stanton was offering was a massive 50% return relative to the $7.50 he paid just two years before in December 1962.
Buffett describes how the New England textile industry was spiraling. Which was His initial rationale for buying shares, however, was that it was selling at a steep discount to its working capital per share and book value per share.”
What does a $0.125 drop in offer Mean?
So let’s get this straight? Stanton wanted to lowball Buffett Partnership Limited’s offer of the initial $11.50 per share down to $11.275 per share. This alone equals a Eighth of a Point. And if we consider the initial Price Buffett paid two years previously of $7.50 per share for Berkshires Shares. Equals a 50% margin at $11.275 per share. So the fact Stanton slighted Buffett on ($0.125) would set in motion a event in the future from this shaved Offer that has made The Oracle of Omaha the Legend he is!
Buffett Partnership Limited Responds
In light of the clear lowball that was sent in the form of a passive aggressive counter offer letter offering $11.275 from Seabury Stanton to BPL after the initial offer of $11.50 agreement to buy back shares. I think it would be understandable this lowball letter had a irritating affect on Mr. Buffett. It was understandable Mr. Buffett did not accept this situation. And felt the need to establish ownership of the situation. So he planned his next moves carefully in secret.
Buy up undervalued or falling value Class A Shares Quietly
Mr. Buffett amazingly began to buy shares quietly instead of selling his partnerships exposure. Warren began quietly buying the declining shares of Berkshire Hathaway’s equities in the market as the company began to drift downwards in price. Buying the Shares at a Discount is a savvy move by Partnerships wanting to buy their way onto Boards of Directors.
This classic action will force change through an Activist Investor Action. The act of buying large blocks of shares quietly and buying undervalued shares will allow a investor or Investment Group to acquire a seat at the Board of Directors Meeting and table. The question is? Exactly what was Mr. Buffett aiming for when he began buying shares of Berkshires Hathaways outstanding shares?
Mr. Buffett’s plan was to gain control of Berkshires Hathaway Board of Directors Seat. For the purpose of exacting change to the Executive management from the Board of Directors level. This was secretly Warren’s Goal.
Everyone was telling Mr. Buffett Buying Berkshire Hathaway would be a Mistake!
Even though quietly people were telling Warren Buffett that buying control of Berkshire Hathaway would be a mistake. The mentee of legendary Columbia Professor Ben Graham did exactly the contrarian option. And opted to begin buying a controlling stake in the failing Berkshire Hathaway Company. Warren Buffett officially took control of Berkshire Hathaway on May 10, 1965. And on the Day the news broke that Warren Buffett had obtained control of Berkshire Hathaway, the President of Berkshire Hathaway, Seaford Stanton who had recently slighted the up and coming maverick Investment Partner Warren Buffett, quietly tendered his resignation immediately following the news.
This is one of many legendary Investments that would cement Warren Buffett as a Man the many Public Company Chairmen should never trifle with again!
Dear Mr. Chairman By Jeff Gramm
Are you interested in Boardroom Battles and Challenges?
Please read Dear Mr. Chairman by Jeff Gramm. There is a time and place for Activist Investment Stories. This book is a good start. It’s also interesting to read about David Ellison’s recent action to obtain positioning for Skydance Paramounts acquisition offer for Warner Brothers HERE.
What happened after Warren Buffett took control of Berkshire Hathaway?
After taking control of the Board of Directors at 15 dollars per share? Mr. Buffett pivoted the business into insurance, creating a vast conglomerate. Under his leadership, the company achieved a historic compounding shareholder return, famously transforming into a trillion-dollar enterprise. Ultimately retiring stepping aside and appointing Greg Abel a long standing lieutenant assume the helm of CEO in 2026.
Corporate Governance You Be the Judge?
According to Google’s Gemini, the definition of Corporate governance is the system of rules, practices, and processes used to direct and control a company. It establishes a structure for balancing the interests of a company’s stakeholders—such as shareholders, management, employees, customers, and the community. So with this shared, the Corporate governance equation inside many Boards of Directors is a subject that deserves it’s own Political spectrum. Given the breadth and depth of this topic it’s to deep as a topic for todays post. However I do believe we all can agree when someone makes a commitment and fails to satisfy the Board of Directors Mission, Obligations and Marching orders? That it’s time to reconsider your effectiveness for the organizations benefit. Outside Removal by the Boards vote is always a threat to a Board members incumbency.
I do hope you enjoyed todays post as this post details some key facts about Mr. Warren Buffett’s beginnings inside Investing using a Partnership Structure and his mission to obtain a controlling interest in a Public Company that eventually became Mr. Buffetts Holding Company. However if you have read and followed and researched the history of Berkshire Hathaway like Christopher Bloomstran has and has become an expert on Berkshire? It’s highly likely we mutually agree the facts do align that Mr. Warren Buffett and his team at Berkshire Hathaway has touched nearly all of our lives in a positive way through his long horizon investing. Including Warren’s ambitious and righteous humbling mission of evicting Seabury Stanton from Berkshire’s Board of Directors during 1965.
JS
