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Warren Buffett’s BofA Deal Extends His Wall Street Empire

July 6, 2017

So, Warren Buffett’s Berkshire Hathaway is now the largest single shareholder of Bank of America. He recently converted his $5 billion holdings of BofA 6% preferred shares and warrants into 700 million shares of common stock. With BAC currently trading at $24.82 a share, Berkshire Hathaway’s holdings are now worth $17.34 billion.


Unrealized gains of $12.34 billion - not bad for a 6-year return on investment. And lest we forget that Berkshire Hathaway also took down $300 million each year in preferred share dividends.


BUFFETT’S SWEETHEART DEAL WITH BANK OF AMERICA.    In August 2011 Buffett helped bail out Bank of America, whose shares had fallen 30% in the first 3 weeks of August over concerns the bank didn’t have enough capital. Berkshire Hathaway provided Bank of America with a $5 billion cash infusion, along with an implied imprimatur, or endorsement, from the most respected investor in America.


For his “troubles,” Buffett and Berkshire Hathaway received $5 billion worth of preferred shares that paid a 6% dividend. He also received warrants for 700 million shares of company stock - with an exercise price of $7.14, the price at which BAC shares then were trading. FYI - later that year, BAC’s market value dipped further as shares fell below $6. But of course, that was only temporary.


BERKSHIRE HATHAWAY’S OTHER WALL STREET HOLDINGS.    Just so you don’t think that Warren Buffett is a one-trick pony - not that you would entertain such thoughts - it’s worth noting that Berkshire Hathaway has a well-diversified portfolio of Wall Street banks and financial institutions, that includes the following (as of 3/31/17):


  • Wells Fargo – 480 million shares, or nearly 10% (biggest shareholder).
  • US Bancorp – 85 million shares, or 5% (7th biggest shareholder).
  • M&T Bank – over 5 million shares, or 3.5% (8th biggest shareholder).
  • Goldman Sachs – nearly 11 million shares, or 2.8% (7th biggest shareholder).
  • BNY Mellon – 33 million shares or 3.1% (8th biggest shareholder).
  • American Express – over 151 million shares or 17%.


Source:  New York Post (6/30/17), CNBC Portfolio Tracker.