Buffett donates Berkshire shares worth billions – Gates Foundation left out for the first time

Shares going to four family foundations

The 95-year-old is thereby continuing the gradual exit from his Berkshire Hathaway stake that he has announced over the years. One Class A share of Berkshire Hathaway is worth around 745,000 US dollars. The B share trades on the NYSE at just under 500 US dollars. The shares are being transferred internally between Buffett and the four foundations; no sale on the open market is involved.

At the same time, this year's donation marks a break with a commitment Buffett made roughly 20 years ago. The background to the rift is the Gates Foundation's ties to deceased sex offender Jeffrey Epstein. In March, Buffett said that he and Microsoft founder Bill Gates had had no contact whatsoever since the matter became known.

Break with the Gates Foundation after 20 years

The Gates Foundation had been the largest recipient of Buffett's donations in recent years. Since 2006, Buffett has bequeathed the foundation Berkshire shares worth more than 43 billion US dollars, according to CNBC. In a 2006 letter to Bill and Melinda Gates, he pledged to transfer Berkshire shares to the foundation annually for the rest of his life, as long as at least one of the two founders remained actively involved in the organization.

This year, Buffett is breaking with that tradition: the foundation of Microsoft co-founder Bill Gates, which for years was the largest recipient of the donations, is receiving no shares this time. Buffett had already suspended his annual contribution while an external review commissioned by the foundation and conducted by the law firm WilmerHale examined the historical ties to Epstein.

"My goal is to give away all of my Berkshire shares within about eight years," Buffett said. If that does not succeed, the remaining shares are to flow to the four foundations by that deadline in any case. The date by which his children are to have completed the transfer is December 31, 2034. Buffett intends to explain the background to his decision on Wednesday in an appearance on CNBC's "Squawk Box."

Buffett's plan: exit by 2034

Bill Gates spoke on June 10 before a US House of Representatives oversight committee and called his connection to Epstein a "serious mistake in judgment." He said he neither knew of nor participated in any criminal conduct, and stated that he last spoke with Buffett in January, before Epstein documents were released.

Gates speaks before Congress

In recent months, emails had been released in which Gates' name appeared repeatedly in connection with the deceased sex offender Jeffrey Epstein. The correspondence focused public attention on the relationship between the Microsoft co-founder and Epstein, who had been convicted of sexual offenses and later died in custody.

Buffett's fortune is estimated at around 150 billion US dollars. With his investments, he has significantly outperformed the broader stock market over the decades. His investment philosophy: he buys into promising companies at attractive prices.

In the 1960s, Buffett bought the small textile company Berkshire and over the decades transformed it into one of the largest and most successful investment conglomerates in the world. What was once a textile company became a conglomerate with stakes in a broad range of businesses – from insurers and energy companies to consumer goods manufacturers.

Buffett had led the company until the turn of the year, stepping back from the holding's operational management at the age of 95. This year's donation step therefore comes in a phase in which Buffett wants to place his life's work in charitable hands in an orderly manner.

Consequences for the Gates Foundation

Forgoing the Gates Foundation as a recipient is not only a financial blow for the foundation. For nearly two decades, the annual Buffett donation was a central building block of the Gates Foundation's financial resources. The sudden stop could change the foundation's room for maneuver in allocating funds for global health, education and development projects.

It remains unclear whether donations to the Gates Foundation will be resumed at a later date. In March, Buffett said he would not resume contact with Gates until there was clarity about his ties to Epstein. A result of the external review by WilmerHale has not been made public to date.

The transferred B shares will not be traded on the stock exchange but will remain in the possession of the foundations. This does not change Berkshire Hathaway's shareholder structure or the conglomerate's operational setup.

Accelerated transfer to the family foundations

With the pace of transfer now announced, Buffett is speeding up the disposal of his stake. If his children do not complete the distribution within the deadline, the remaining shares will automatically flow to the four family foundations by December 31, 2034. The exit is thus contractually secured.