Blame it on the Internet.
With its stock in the midst of a sharp downturn and unsubstantiated rumors questioning the health of CEO and investing guru
made an unusual move Thursday: It issued a press release to deny the rumors.
While the denial isn't unusual in itself, it marks a sharp departure from standard operating procedure at Berkshire, the typically tight-lipped holding company for the stakes acquired by the Omaha, Neb., sage of long-term investing. And, depending on where you stand, the denial points either to the Internet's unique power to amplify these kinds of apparently baseless rumors, or to the desire among companies and investors to use the Net's wild reputation to wrap complicated issues up in tidy packages.
The rumors appear to have started Tuesday on the
Finance message boards. "Warren In Hospital-Critical!" wrote
on Feb. 8 at 8:58 p.m. EST. "Is Warren in Hospital?" wrote
two hours later.
While a handful of posters tried to confirm the rumors, one active poster who goes by the handle
wrote nearly a dozen bearish declarations in capital letters: "BUFFETT OLD AND WEAK, SELL!" "SELL SELL SELL SELL SELL SELL SELL SELL."
Volume in the Class A shares picked up sharply, culminating in volume of 131,000 and 168,000 shares, respectively, on Wednesday and Thursday. (Daily volume in the stock rarely reaches six figures.) The stock continued to slide, leaving it down 10% for the week. "One person screams fire and it gets going from there," says Kyle Rosen, a hedge fund manager for
Rosen Capital Management
, which doesn't have holdings in Berkshire stock, though some of its clients do. The action prompted an unusual decision by Berkshire.
"While it has been a long-standing Berkshire policy to not comment on rumors, we are making an exception with respect to these recent rumors," stated Berkshire in its Thursday afternoon press release. "All rumors regarding share repurchases and Mr. Buffett's health are 100% false." Berkshire spokesman Marc Hamburg declined to comment further.
The spectacle elicited chuckles from some observers. "The health thing was a bunch of nonsense," says Robert Hagstrom, manager of the
Legg Mason Focus Trust
fund and author of
The Warren Buffett Portfolio
. Buffett's "laughing about it. His health has never been better."
All the same, it's not at all clear that the rumors, wherever they started, drove significant selling in the stock.
Even before the health talk started, Berkshire's stock had been in a sharp downtrend for nearly a year, leaving it more than 40% off its highs of last spring. The stock has been pressured by factors including a perceived decline in the prospects for Berkshire's core insurance business, as illustrated by recent sharp declines in shares of giants such as
; setbacks in core Buffett holdings such as
, which after long run-ups are now nearer their 52-week lows than their highs; and a retreat from the cult of Buffett, which at one point gave Berkshire shares a significant premium to the actual value of the company's underlying assets.
"The stock is simply reacting, much as the insurance sector has been rather weak lately," says the
specialist in the stock, James Maguire Sr. of
. And this week's moves in the stock aren't unusual in themselves, despite a surge in volume. "It's a very tight market with respect to volume and price fluctuation," Maguire says.
"Determining cause and effect is not so simple," says Charles Campbell, a research analyst for
who was hard-pressed to give the rumor any credit for the move in Berkshire's stock. "Its longtime shareholder base has been fairly constant, so it probably didn't react to the rumor." Campbell doesn't have direct holdings in the stock.
And at around $45,000, Berkshire stock isn't the kind of stock that message-board traders are typically associated with. Despite hyperpumperfulofcrap's gusto, it's unlikely Berkshire would be the target of pump-and-dumpers on the boards.
Also notable is that two of the three top boards visited by investors --
-- showed few postings on Buffett's health Tuesday. Even on Yahoo!, the postings were thin and mostly dominated by one poster.
In any case, message-board posters got the last laugh, though in doing so they may have illustrated just why the Web has its loony reputation. "I just saw Warren Buffet getting a lap dance at the local Kit-Kat Klub,"
wrote on Thursday. "He looked fine to me!" Berkshire didn't immediately return calls seeking comment.