As billionaire Warren Buffett turns 87 today, his investment firm Berkshire Hathaway Inc has become the single-largest shareholder in Bank of America - the second-biggest bank in the U.S. - by exercising its right to acquire 700 million shares at a steep discount.
Berkshire had been receiving $300 million a year in interest on its preferred shares. If it wishes, Berkshire can use its preferred shares to satisfy the $5 billion cost of exercising the warrant. Buffett made a decision to trade that for common shares because Bank of America is now paying a dividend of 48 cents per share annually. If the common dividend remains below 44 cents, it is highly probable that we will exercise the warrant immediately before it expires. Prior to that, Bank of America paid $0.075 per share in dividends each quarter.
Bank of America chairman and CEO Brian Moynihan.
"The effects of this are going to go on for a long time", Buffett said.
Buffett said Berkshire hasn't written much catastrophe insurance in recent years because prices were too low, so that will limit the Omaha, Nebraska-based company's exposure. I'm very happy. We have 700 million shares.
The results will "generate news headlines", Sloan said, and the "best thing" for the bank to do is to "stay focused on fixing problems".
Warren Buffett turns 87 on Wednesday, and over the past half-century, he has turned a failing textile company into a legendary conglomerate.
Billionaire investor Warren Buffett told CNBC on Wednesday that he had not sold a share of Apple AAPL.O and was not concerned about Wells Fargo WFC.N as a long-term investment, calling it a "terrific" bank.