Warren Buffett’s Berkshire Hathaway Inc. now became the largest shareholder of Bank of America Corp. (NYSE: BAC) by having the right to acquire 700 million shares at a steep discount which is more than tripling an investment made six years ago. Among the second and third largest banks in the U.S. Berkshire is now the largest shareholder with stakes of about 6.6% in Bank of America and 10% in Wells Fargo & Co. Berkshire exercised warrants to acquire shares for about $7.14 each which is below their closing price of $23.58 that was down 14 cents from Monday.
In June, Bank of America decided to boost their dividend by 60% which gave Berkshire the ability to swap $5 billion of Bank of America preferred stock that was purchased 6 years ago to pay for shares. Now, the new common shares are worth about $16.5 billion which gives Berkshire about $11.5 billion paper profit.
$336 million annual dividends from Bank of America will be collected which is more than $300 million generated by the preferred stock. $800 million of annual dividends from Wells Fargo will also be received.