Home Business Berkshire Hathaway Will Exercise Its Warrants for 700 million BoFA shares

Berkshire Hathaway Will Exercise Its Warrants for 700 million BoFA shares

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Berkshire Hathaway today announced that it will exercise its warrants for 700 million Bank of America shares.

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Bank of America, which is the second largest bank in the country by assets, received permission from the Federal Reserve on June 28 to increase its per-share dividend to 48 cents a year.  Warren Buffett is exercising these warrants and swapping its preferred stock into the common stock since Berkshire will receive annual dividends of $336 million from the common stock, which exceeds the $300 million it currently receives on its $5 billion of 6% preferred stock that it purchased in August, 2011.  Berkshire will be purchasing the 700 million shares of Bank of America common stock at $7.14 per share, or $5 billion.  At Bank of America’s closing price yesterday of $24.32, Berkshire’s investment is valued at $17 billion, which results in Berkshire being its largest shareholder with a 7% stake.

Upon the exercise of these warrants, Berkshire will be the largest shareholder of both the second and third largest U.S. banks.  Berkshire’s 10% stake in Wells Fargo, which is the third largest bank, is currently valued at $27 billion.

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