Berkshire said Friday it would use the $5 billion in preferred stock it owned to fund the common stock purchase. Berkshire owned about 11 million common facebook/" target="_blank">shares of Goldman as of March 31, according to recent filings. With Bank of America's stock BAC, -0.25% closing Friday down 0.2% at $24.26, 700 million shares would be worth $16.98 billion, a 240% gain. A 700-million-share stake would represent 7% of Bank of America's common shares outstanding. That would make Berkshire the largest shareholder, according to FactSet, just above the 652.4 million shares, or 6.6% stake, owned by The Vanguard Group.
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And to show there was a bit of risk involved, BofA facebook/" target="_blank">shares dipped to below $6 a shares later that year. Fast-forward to Thursday, when BofA shares closed at $24.32 — more than three times the value of Buffett's warrants. The shares came with warrants for 700 million shares of the company at about $7.14 a share, about where the stock was trading at that time. Warren Buffett's Berkshire Hathaway is preparing to pocket a $12 billion gain for bailing out Bank of America — more than doubling his initial investment in 2011. Buffett, seeing a deal, swooped in and brokered a deal with the bank: $5 billion in preferred shares that paid a 6 percent dividend — or $300 million a year.
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How Warren Buffett bagged a $12 billion profit on bank deal
That allowed Buffett to turn a farsighted investment he made in 2011, when BofA was reeling from the aftermath of the financial crisis, into a $12 billion paper profit. The warrants paid Berkshire about $300 million annually, and the common stock will generate an estimated $336 million, a 12 percent boost in dividend income. Similarly, he made a $5 billion loan to Goldman Sachs (GS), which garnered him $1.7 billion in profit. At the time, Buffett bought $5 billion worth of the company's warrants, which gave him the right to buy a certain amount of its common stock in the future. But cleaning up the lender's ensuing toxic mortgage mess cost Bank of America more than $50 billion.And to show there was a bit of risk involved, BofA facebook/" target="_blank">shares dipped to below $6 a shares later that year. Fast-forward to Thursday, when BofA shares closed at $24.32 — more than three times the value of Buffett's warrants. The shares came with warrants for 700 million shares of the company at about $7.14 a share, about where the stock was trading at that time. Warren Buffett's Berkshire Hathaway is preparing to pocket a $12 billion gain for bailing out Bank of America — more than doubling his initial investment in 2011. Buffett, seeing a deal, swooped in and brokered a deal with the bank: $5 billion in preferred shares that paid a 6 percent dividend — or $300 million a year.
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collected by :Jack Luxor
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