Warren Buffett Becomes Bank Of America's Top Shareholder, Books $12 Billion Profit

Tyler Durden's picture

As we previewed exactly 24 hours ago, Buffett’s Berkshire Hathaway said it will exercise warrants to swap its preferred Bank of America shares for 700 million shares of BAC common stock, making Buffett the largest shareholder, surpassing BlackRock, Vanguard and State Street . Buffett is also the top shareholder at Wells Fargo.

Buffett exercised his warrants, which were due to expire in 2021, to swap $5 billion in preferred stock worth about 6% of the company for common stock at $7.14 a share, less than a third of yesterday’s closing price of $24.32, effectively translating in a profit of $12 billion for the Omaha octogenarian. The decision was prompted by the latest Fed stress test, which allowed the bank to hike its dividend by 60%, from 30 cents to 48 cents. BofA also announced its plans for a record $12 billion stock buyback, almost immediately after the Federal Reserve gave it the green light on Wednesday, while also approving the capital-return plans of 32 other US banks that received the SIFI designation.

As we noted yesterday, in his February letter, Buffett said that an increase in BAC’s dividend above 44 cents would likely prompt him to swap Berkshire's preferred shares in the second-largest bank into common shares now worth about $16.7 billion – more than tripling a $5 billion investment made fewer than six years ago.

Buffett, the world’s fourth-richest man with a net worth of $76.1 billion, according to Forbes, bought $5 billion of Bank of America preferred stock with a 6 percent dividend, or $300 million annually, during a fire sale in August 2011 as the bank worried about its capital needs. The purchase included warrants to acquire 700 million common shares at $7.14 each, a 70% discount to Thursday's closing price.

The preferred shares had little downside, so long as Bank of America stayed solvent. But they had no upside either. With a change in Berkshire's shares, Mr. Buffett is effectively saying that he would like to take part in possible gains on Bank of America's stock as well as enjoy a steady dividend. After the exchange, Buffett's firm, Berkshire Hathaway, would own about 7% of BAC's common shares, giving it a significant role in corporate governance issues from compensation to the election of new directors. Vanguard Group, whose 652.4 million shares give it a 6.6 percent stake, is now the bank's second-largest shareholder, according to Reuters data.

Buffett – America’s de facto private sector “lender of last resort” during the financial crisis - made more than $25 billion of high-yielding investments between 2008 and 2011, in financially troubled lenders like General Electric Co. and Goldman Sachs Group, none of which would have paid out had the Fed not stepped in with a multi-trillion taxpayer funded rescue of the US financial sector.

The decision raises ethical hackles for America’s favorite homespun billionaire, who loves to play the part of benevolent philanthropist even though he’s effectively cashed in on the financial crisis, and will now profit from a bank that was complicit in kicking thousands of mortgage customers out of their homes, believing it easier to foreclose than work with borrowers to modify the terms of their loans.

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NewNeo's picture

Ahh, he still thinks it's too big to fail! 

HenryKissingerBilderberg's picture

and another Bailout for the welfare queen Buffet!

clymer's picture

Oh Becky Quick, how could you. Was it worth it? Blech

TabakLover's picture

Becky probably got it from behind.....imagining it was George Clooney nailing her.

Wahooo's picture

Wonder how his train set is running? Haven't read much about that lately.

playit's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobproplan.com

Putrid_Scum's picture

From my outside analysis, the only thing that holds the American states together is the Dollar.

I know it's common to think the constitution, or shared values, or the Bill of Rights keeps it together: but it's really the Dollar that binds the states together today. 

Thus, US elites in 2008 did the logical thing and protected the Petro-Dollar. The bail-outs and bail-ins protected the PONZI.

When The Reset happens and the Dollar System goes down, I wonder whether the USA will survive..




new game's picture

the new and improved squid. all for charity of course. this guy makes me ill.

after the ge bailout with gov.org guaratees and on o's econ team he is just another fascist mutherfuk...

Rothbardian in Cleveland's picture

If there are taxpayer bailouts coming you can count on this POS to be first in line with his hands out.

Making Merica Great Again's picture

In other means, he is BoA

Steroid's picture

Exactly! The garden variety.

Capitalism without capitalists!

ArkansasAngie's picture

Do not confuse capitalism with garden variety corruption 

Last of the Middle Class's picture

Ahh, there's some QE money going into the pockets of their "circle of friends".  When you know a company is going to be designated TBTF, jump on their backs and hold on as tight as possible. Never let go. The stock WILL rise.

wmbz's picture

Sweet old uncle (I don't pay enough taxes) Warren. The son of a bitch also loves the death tax, but I am sure his estate will not pay it.

It's different when you are far above the serfs!

buzzsaw99's picture

the fed guaranteed that old geezer a huge profit on his big bank warrants (BAC, GS, et al). fucking maggot. capitalism is dead, long live fascism.

jmack's picture

I thought buffet sold all his  WF after all the wells fargo shenanigans.  (My bad, he just sold a portion to stay under the 10% stake. )

BigCumulusClouds's picture

Actually the non reporting threshold is under 5%. Just sayin.

jmack's picture

They have to maintain a < 10% stake unless they are a bank holding company or get a waiver from the feds as passive investors.

Endgame Napoleon's picture

You mean their algorithm-generated upselling by a low-wage, youth-clique, sales-related workforce in their 20s, as opposed to the frequently absentee, ultra low-wage, momma-clique workforce in the back-office end of banking and credit processing, which, like in insurance, relies on mommas who can accept rock-bottom wages due to major bills, like rent, that are financed by spouses, child support or welfare and taxfare? They give the mommas Tons of excused absenteeism as a consolation for wages that would need to cover rent if they hired/retained many childless, single workers older than the college-bud, unattached rommmates phase of life. They also provide their momma-dominated, back-office bully workforces with plenty of workday diversions in lieu of pay sufficient to cover rent, like baby-mommy, bring-a-photo contests, where we all vote on which frequently absentee mom looks the most like her baby and then decorate bulletin boards with the winning photos or the copious volume of Halloween dress-up days and tacky Christmas sweater contests. Invest in a youth-clique profession on the retail end and, especially, in the related, spin-off industries in financial services that employ some of the meanest females I have ever encountered outside of the minority-mom bully clan that lords over the Department of Human Services, bullying out all but 20% (or less) of the whites before they get civil servant status. Save jobs in the momma-crony, back-watching back offices of the financial services industries, including insurance, the most absentee people in the American workforce outside of the Swamp Congress and the SCOTUS!

Perhaps, this is his way of holding the US together via the almighty dollar, and the mommas help hold the country together in their crony-absenteeism gangs, encoated with cutesy, baby-celebration, mom-bonding rituals described as work. The computers really do most of the work, including the management work, explaining the high number of babyvacations per year for the few highly paid people in the buildings who are -- surprise -- almost always in the backscratching, back-watching parenting cliques.

Cordeezy's picture

He bought the stress tests too? Cmon did Munger look over this?


BigCumulusClouds's picture

Warren loves the Federal Reserve and its banks. He cherishes their ability to steal from US citizens 24/7. You never hear him bitch about that. His folksy image is just a disguise for the evil he feeds on.

Endgame Napoleon's picture

The system not only props up the 1%, which includes a lot of US business owners and investors in foreign countries with foreign workforces, in addition to the top 20% of dual, high-earner, salaried, babyvacationing households with private sector jobs, but also props up a ton of babyvacationing government employees, many of whom take safe government jobs with benefits to add family luxury money to the much higher wages of a spouse with a job in the private sector that, likewise, includes benefits. They double up on benefits and jobs that actually pay enough to support households in a country with mass underemployment and millions of uninsured citizens, and yes, most people could do the majority of those non rocket-science office jobs. Many would do the jobs without a babyvacation every other month, in addition to every afternoon and many mornings off for kids, and without phones ringing off the hook with inconvenienced customers. The system protects these people, and the rest of us are screwed, particularly the self-employed and single people without high incomes and without children to qualify them for taxpayer-financed rent, free EBT groceries and taxfare checks in April between $3,337--$6,269, not to mention the crony-parent employment network at all wage levels.

Megaton Jim's picture

You and your Satanic joo buddy Soros need to die, you evil old bastards!

moorewasthebestbond's picture

Buffet is chest-deep in the swampy world of predatory banking, slum-lording, and money laundering at the highest levels.


Not impressed.

Endgame Napoleon's picture

The slum lords who play in the big leagues are the richest people, not the small fry, but the ones with government connections. This is how we prop up "independent" households for our 62% out-of-wedlock moms. The fake-feminist value system insists that they have no social pressure to marry to get an independent household. And this system provides employers with a huge workforce, which has an incentive to work for less. The less the mommas make, the more welfare they get. The work requirement for the Clinton welfare "reform" is 20 hours per week. This drives wages (and hours) down for other single people who get zero (or nearly zero) help with unaffordable monthly bills from government, including the US Treasury Department. Whereas, the sex-and-reproduction, pay-per-birth crowd gets everything from free or reduced-cost rent, to free food, to free energy, to nearly free daycare, to monthly cash assistance and a Child Taxfare Credit of up to $6,269 that constitutes 3 to 4 months of wages for millions of single, childless people living in mom's basement, many of whom have college degrees that are not very useful in most bully-momma clique jobs in financial services. Multiple, costly, "legally required" licenses are not very uselful, either.

silverer's picture

I think Warren is right. He needs to get the bejesus taxed out of him.

Catullus's picture

Good for him. Now the only way to truly book the profit would be to sell the shares

QQQBall's picture

well no... he can found an organization of some sort and donate the shares. Buffet talks about taxes, but paying them? Not so much?

Bill of Rights's picture

States are failing and this Prune rakes in $12 billion dollars.

Jtrillian's picture

For a man who claims to invest based on value, he sure is holding one giant TURD SANDWICH. 

Too big to fail banks are time bombs.  They are full of toxic derivatives - WMD's in Buffets own words.  Such a stinkin hypocrite. 

The financial industry is systemic.  It's toxic.  And it will be the end of the Western world. 

Agstacker's picture

Systemic and Semitic.  

Gordon_Gekko's picture

I think all his ill gotten billions must be appropriated and distributed equally amongst the citizens of the US. The asshole says he has already given it away, and he wants more taxes, so it shouldn't bother him I think (unless this MOTHERFUCKER is a hypocrite - 100 percent taxes should please uncle warren). Also, it is the tax payers who have funded his wealth so it is quite appropriate.

Aw Yeah's picture

I agree with "I think all his ill gotten billions must be appropriated and distributed equally amongst the citizens of the US", but sadly I don't think that will be happening any time soon because "it is the tax payers who have funded his wealth" is by design.

GlassHouse101's picture

Moral of the story, crony capitalism pays. You can have all the riches of the world, I'd rather have my soul.

moman's picture

"Have Cement Will Travel'  ........ Does anyone know where Uncle Buffy has his bunker ?

venturen's picture

He will be sending extra tax money...like maybe like INCOME....this whole seperate income tax for rich investors is getting OLD.... This man behind the screen will not be missed when he is gone!

falak pema's picture

Berkshire now supercedes JPM and the SQUID as the new TBTF boss of fiat CB controlled $ world.

And he is 100% global... So he will now be gunning for the head of the Duck as the isolationist king of Make America local and hiding behind that wall!

Its Buffet who now wears the hat of top financial HEGEMON of US finance. 

venturen's picture

So the FED printing was to RESCUE WARREN BUFFET? Yes, sir!

Lost in translation's picture

Makes one wonder at what age and at what level of amassed fortune a man says, "I think I have enough money, now."

GRDguy's picture

Man, who doesn't know when enough is enough, will never have enough.

moonmac's picture

First 4 Rules of Free Market Capitalism:

#1  There’s no such thing as a bailout

#2  Nobody is ever too big to fail

#3  0% interest rates can’t exist

#4  Money can’t be printed out of thin air

Warren Buffet is the greatest benefactor of all 4 broken rules. Don’t fool yourselves we’re living under a Crony Corporatist-Nanny Socialist System.

Warren was able to wake Hank Paulson out of bed at 3AM to demand he do something during the last financial crisis. Maria B. interviewed Hank and they had a big laugh because at first Hank thought it was his mom’s gardener calling so late who is also named Warren.

7thGenMO's picture

Your "Crony-Corporatist-Nanny-Socialist" description is especially appropriate given Buffet's support of Billary.  He would also benefit from Sanders Socialism because he profits from .gov economic control.  Socialism allows the elite to become even more entrenched due to government enforcement eliminating competitive forces.   Owning two TBTF banks surely has secured him a position on the board of the One Bank for global domination. 

Ink Pusher's picture

Well Warren, thanks for confirming that you are now on the top 3 on the list of 'Scumbag Billionaires'.

D-Fens's picture

Rich white men like Buffet long ago sold out to the Jewish money power.

Trump as well, bitchez.

7thGenMO's picture

A Buffet for every Soros, a Morgan for every Rothschild, a Clinton for every Epstein.  Is there a ????? for every Kushner?

GRDguy's picture

Now do you understand The Great Red Dragon's goal "to own the earth in fee-simple."

Buffett has always been an agent for The Great Red Dragon (aka Deep State)

since the days he worked for Goldman-Sachs and daddy was a congressman.

SmittyinLA's picture

The preferred shares had little downside, so long as Bank of America stayed solvent

The preferred shares had little downside, so long as Bank of America stayed solvent

so long as Bank of America stayed solvent

so long as Bank of America stayed solvent

Read the fine print