Warren Buffett's company Berkshire Hathaway will become the biggest shareholder in Bank of America. Fred Katayama reports.
Warren Buffett is becoming the biggest shareholder in Bank of America. On Friday, his company, Berkshire Hathaway, invoked its right to buy 700 million shares of the second-largest U.S. bank. In 2011, at a time when many on Wall Street worried that BofA didn't have enough capital, Buffet invested $5 billion in the bank. The deal came with warrants to buy an extra 700 million shares of BofA at more than $7 a piece, about where they traded at that time. Today, it trades at around $24. Now Buffett is exercising those warrants. Berkshire will take a roughly seven percent ownership stake in the Bank of America. That's about $17 billion. Jonathan Stempel covers the story for Reuters. (SOUNDBITE) JONATHAN STEMPEL, CORRESPODENT, REUTERS (ENGLISH) SAYING: "Buffett is expected to exercise the warrant sometime in the third quarter, whenever Bank of America actually raises its dividend. Thereafter, Buffett is not indicating his plans whether he's is gonna hold on to the shares for a long period of time. He is a long-term investor as a general matter. But he has owned Wells Fargo shares for many, many years. It is reasonable to expect he will own Bank of America shares for a a long tim. It is possible, of course, that, if something goes wrong, or if he finds a better investment, he may decide to move his money elsewhere." Buffett became known as a lender of last resort to many companies during and after the financial crisis. He invested more than $25 billion into companies such as Goldman Sachs, General Electric, and Dow Chemical. Buffett's backing gave investors confidence in those companies.