Buffett will step down as CEO, coupled with performance falling short of expectations, Berkshire Hathaway dropped over 6% during intraday trading

Berkshire Hathaway's stock price came under pressure on Monday as investors digested the news of the Oracle of Omaha, Warren Buffett, suddenly announcing his resignation as CEO, and speculated on where the company would head after his legendary 60-year management career.

Over the past weekend, the 94-year-old Buffett announced to shareholders at the Berkshire annual meeting in Omaha, Nebraska, that Greg Abel, the vice chairman responsible for non-insurance operations, would succeed him as CEO. The board unanimously voted on Sunday to appoint Abel as president and CEO effective January 1, 2026, while Buffett will continue to serve as chairman.

On Monday, Berkshire's stock price fell more than 6% at one point, after Friday's A shares had reached a record closing high of $809,350 per share, and B shares had hit a record closing high of $539.80 last Friday. Berkshire first issued B shares in 1996, priced at one-thirtieth of the A shares. In 2010, B shares underwent a 50-for-1 stock split.

As of Monday's close, Berkshire was down 5.12%. Nevertheless, based on Monday's closing price, Berkshire's stock is still up about 13% year-to-date, far exceeding the S&P 500 index's decline of nearly 3.6% during the same period.

Buffett's announcement of his resignation as CEO marks the end of an epic era for Berkshire. Sixty years ago, the company was a struggling New England textile mill, which Buffett took over through his investment partnership. Today, Berkshire has grown into a unique giant with a market value close to $1.2 trillion, with businesses spanning insurance, railroads, retail, manufacturing, and energy. Buffett chose to pass the baton just as the company's stock price reached a new high, making his exit at the peak of success.

The decline in Berkshire's stock price on Monday may also have been influenced by the company's first-quarter earnings report, which showed a 14% drop in operating profit, with insurance underwriting profit plummeting by 48.6%. Berkshire stated that wildfires in Southern California caused $1.1 billion in losses during the quarter.

Ackman Expects Berkshire to Return Capital

Wall Street mogul and Pershing Square CEO Bill Ackman expects that after Buffett's resignation as CEO, Berkshire may increase cash returns to shareholders:

I believe they will start returning capital. The ways to return capital may include issuing dividends and being more aggressive in stock buybacks.

Under Buffett's leadership, Berkshire has never issued dividends and has not conducted stock buybacks since the second quarter of 2024.

Despite its strong capital position, Ackman expects that Abel and Berkshire's management will be "more cautious" in their first major deal after Buffett's departure.

Ackman has long been a fan of Buffett, and on Monday he referred to Buffett as "one of my most important heroes, both in business and in life."On the same day, Panshing Square announced an increased investment in the real estate company Howard Hughes, planning to develop it into a corporate group and investment platform similar to Berkshire Hathaway.

Ackman expressed confidence in Abel's ability to manage Berkshire, despite the new CEO facing the enormous challenges left by Buffett in stock selection and acquisitions. Ackman stated:

Greg Abel is an outstanding operator and an excellent capital allocator in the businesses he manages. However, it has yet to be proven whether the current management team possesses Buffett's ability to acquire companies, especially given the current scale, which makes it more challenging. But I wouldn't bet against Berkshire failing.

Buffett will not truly leave

Macrae Sykes, a portfolio manager at Gabelli Funds and a Berkshire shareholder, stated:

Shareholders should welcome this transparent transition and also believe that Buffett will not truly leave. Continuing as chairman means he can continue to guide Greg and the management team at Berkshire and provide valuable wisdom when significant capital allocation inevitably arises.

UBS Group's Berkshire analyst stated in a report:

Buffett is leaving a company that has become less dependent on his investment abilities, which has a range of leading businesses with strong cash flows. Operationally, we expect Berkshire to undergo little change, and under Abel's leadership, its corporate culture and strategy will remain unchanged