CNBC reports that because of an astute investment made in Bank of America six years ago while the bank was struggling, Warren Buffett is about to make a quick $12 billion and become the financial institution’s largest shareholder.
Buffett’s Berkshire Hathaway said Friday it will exercise warrants in Bank of America that will allow it to acquire 700 million common shares in the bank at an exercise price of just $7.14 each, or about $5 billion.
Bank of America shares closed Thursday at $24.32 a share, making that stake actually worth more than $17 billion. So it’s a quick $12 billion paper profit for the Oracle of Omaha.
Bank of America said it would make the dividend increase official “beginning in the third quarter of 2017.” That period begins Monday. Berkshire said it will exercise the warrants once that hike is official, instantly making Buffett that $12 billion, or more if the stock continues to go higher.
The Buffett-led conglomerate will also then become the bank’s biggest shareholder, surpassing Vanguard, which holds 6.6 percent, about 652 million shares, according to FactSet.
In the past, Berkshire indicated it would likely not execute the warrants until just before the 2021 deadline. But in his annual letter to shareholders, Buffett signaled a change of heart.
“If the dividend rate on Bank of America common stock — now 30 cents annually — should rise above 44 cents before 2021, we would anticipate making a cashless exchange of our preferred into common,” he said in his annual letter to shareholders.
Berkshire is already the largest shareholder in another major financial institution: Wells Fargo. Buffett also has a sizable holding in Goldman Sachs, a stake that dates back to another shrewd investment made by the investing legend in the wake of the financial crisis.
WHAT CAN THIS NEWS TEACH YOU ABOUT FINANCIAL INTELLIGENCE?
I have come to know and admire Warren Buffet as the most successful investor in modern times.
From what you have read in the story above, you’ll agree with me that aside from Buffet having a high level of financial intelligence, he is fond of investing into corporations and companies that are struggling financially.
He has the uncanny ability to foresee the eventual boom of such companies and he does not hesitate to put in his best into the investment to make it work.
A lot of people today miss out of opportunities that could’ve made them wealthy because of scepticism. In most cases, they have every right to be doubtful because doubt is the direct result of the Fear of Failure which is driven by Ignorance.
When you are not financially enlightened on the basis of finance, investment and wealth, you may not be disposed to make the kind of investments the super rich make and that is what keeps them ahead of you…
Knowledge gap is the simple reason behind the rich getting richer and the poor getting poorer.
Acquire the necessary Financial Literacy and very soon, you’ll be making the kind of investments that Warren Buffet makes.
To do this, start by reading the 15 Benefits of Financial Intelligence.
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