Warren Buffett is $1.5 Billion underwater on his Bank of America stock but hes cruising
Bank of America’s stock price just broke into the embarrassing sub-$5 stock basement. Somewhere in Omaha, are alarm bells going off?
Yes, Bank of America’s stock swoon is dragging down America’s wisest investor, Warren Buffett, who now is about $1.5 billion underwater on his BofA common-stock warrants.
Buffett threw a lifeline to Bank of America this summer with a $5 billion confidence-boosting investment. Don’t worry about Buffett, though. He is guaranteed a profit on his BofA investment. The banking giant must repay Buffett’s $5 billion, plus a 5% premium, at any time. Plus, the world’s third-richest man will rake in dividends of $300 million a year from BofA, and he won’t give up those payouts no matter what sub-basement BofA shares tumble into.
But Buffett’s cherry atop his BofA sundae was warrants that allow him to buy 700 million Bank of America shares at a strike price of about $7.14 a share.
$7.14 a share. Ouch. BofA shares are now at $4.94. (The stock traded as high as $8.80 the day Buffett’s investment was announced.)
Buffett’s warrants may be exercised in whole or in part in the 10 years following the closing of the deal, so he can afford to be very patient with Bank of America’s stock price. But Buffett already is waiting out his other crisis investments, too.
Buffett made a fortune loaning his golden halo to General Electric during the financial crisis. And though he already made a fat profit on his investment in GE preferred stock, he continued to hold warrants entitling him to buy 134.8 million shares of GE common stock at $22.25 each. GE shares are at about $16.87 today, leaving those warrants deeply underwater as well.
Again, Buffett made a mint on his 2008 crisis investment in Goldman Sachs, but warrants he continues to hold for Goldman shares are out-of-the money by about 25%.
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warren and lloyd..sitting in a tree..yeah you know the rest..
you see..big bohemoths like WB dont lose..even when they do lose..they dont..read the article..understand why we are on a hiding to nothing as mere peasants trying to make a buck on markets..no sweetheart deals for us..
401
Well, this is a lesson on how it is done. Rolling the die on billions, but with the clout to work a sweetheart deal on the side that never loses. It’s a win/win situation for these high rollers on the backs of the 99%.
I think I will take up prayer warfare as a hobby. A medium sized meteor at 3555 Farnam St # 1440 Omaha, NE 68131-3378 ought to do for starters.
lucky bastard would be away that weekend..