Account Info
Log Out
English
Back
Log in to access Online Inquiry
Back to the Top
Tech stocks rally during the banking turmoil
Views 4726 Contents 26

Could this be Warren Buffetts chance for a second big bank trade?

The last bank trade was a massive double digit billions trade!

*BIDEN OFFICIALS TALKED WITH BUFFETT IN RECENT DAYS: SOURCES
*SENIOR BIDEN OFFICIALS IN TOUCH WITH BUFFETT ON BANKS

THE BANKING TRADE
Buffett already had a massive trade within the banking industry.
In 2011 Berkshire invested $5 billion in Bank of America $Bank of America(BAC.US)$ .
Bank of America was struggling with numerous legal issues in the wake of the subprime mortgage crisis.

The $5B deal was structured this way:
•Preferred shares
-> 6 percent annual dividend
•Warrants
-> exchangeable into 700 million common shares in the bank at an exercise price of just $7.14

From 2011 until 2017 Warren Buffett received a dividend of $0.44 per year, roughly equating to $300mil/y.
In 2017, after passing the second of two annual stress tests by the Federal Reserve, $BAC got the go-ahead to hike its annual dividend to 48 cents a share, a 60 percent increase.
That event changed everything for Berkshire as it brought the Dividend up to the same level as the preferred.
The warrants would expiring in 2021 and the dividend came perfectly to make the jump.

The 700,000,000 shares from $7.14 were showing a $12,000,000,000 profit as the stock was trading at 24$ at the time.
Berkshire exercised the warrants and the result was a massive trade.
~6y of dividends amounting to about $1,800,000,000 which on its own shows a 36% gain.
However given the exercised warrants the total profit, even if warren is still holding equates to $13,800,000,000 or +178% gain or 30% ROI per year.

Because Warren still holds $BAC he gets to enjoy a $0.88 dividend.
Berkshire owns a total of 1,032,852,006 shares and thus gets to appreciate a $908,909,765 dividend each year.
Could this be Warren Buffetts chance for a second big bank trade?
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more
2
+0
Translate
Report
32K Views
Comment
Sign in to post a comment
    avatar
    Video Sharer
    625Followers
    68Following
    1993Visitors
    Follow