Holy shit. So remember Uncle Buffets 5Billion dollar investment in BAC last August?
He bought 5B worth of preferred shares paying a 6% dividend. On top of that, he has warrants to buy 700 million common shares at a strike price of 7.14, and 10 years to exercise. If he were to exercise now, his realized gains just on the warrants would be 1.2B. Assuming BAC hits it's previous high of $53 within the next 10 years, I think this will go down in history as the greatest trade ever. (Realized profits of 35 BILLION over 10 years, on a 5B investment).
Just a though, but as a shareholder, wouldn't you be livid at the dilution here? I mean 700M shares out of 10B outstanding is pretty significant IMO.
$$ O
Three things. 1. BAC hitting its high of $53 unconditional some pretty massive changes seems unlikely. 2. Will Warren Buffet even be alive in 10 years? 3. On a more serious note, it seems like a steal, but realize BAC really badly needed Buffet's confidence there. It's a steep price to pay of fit, but one of the few (relatively) "instant" remedies to their issues.
[quote=canas15]Three things. 1. BAC hitting its high of $53 unconditional some pretty massive changes seems unlikely. 2. Will Warren Buffet even be alive in 10 years? 3. On a more serious note, it seems like a steal, but realize BAC really badly needed Buffet's confidence there. It's a steep price to pay of fit, but one of the few (relatively) "instant" remedies to their issues
Agreed we dont know whether he will live in another 10 years but this is one of the most typical nethods of Warren Buffet. Sly bastard is by far the most apt description of him, because as seen before whenever he buys shares or invests in stock he makes sure its for blue chip companies or thos he can keep with him for long.
Food for Thought Cheers
Regardless of the dilution, BAC got the better deal.
Buffett's investment didn't "do anything"? How do you know? The value of the investment from BAC's stand point is in preventing any number of extreme left tail outcomes. What if the government stepped in this time? What if there was a run on the bank? Buffett is an institution, his stamp of approval means BAC is legit, even if it's not (I don't know if it is or isn't). So BAC overpaid, but what they got was extremely valuable. You can't play the game if you're crippled or no longer in business.
With all the dilution that's already happened, there's pretty much no chance BAC even comes close to it's previous high of $53/share anytime soon. $53/share would equate to something like a $550 billion market cap. A completely healthy BAC would probably be somewhere in the $20 range.
-Coming from a long time lost a crap load of money from BAC-der. (I feel your pain on this one).
This is why people shouldn't praise the guy so much. Shit just gets handed to him on a silver platter, because he has that "good guy" vibe.
He built the Berkshire empire from scratch. He wasn't just handed great deals during his prime in the 60's-80's.
I picked up April calls for 8 strike back in the beginning of march for under .50 theyre 1.25 now
The dilution isn't such an issue, I'd wager.
More than anything, Buffet's approval is a very nice thing to have, that's for sure.
OP, you're an idiot. First, BAC is not going back to $53 in the next 10 years. And second, you're saying that if BAC goes from todays price of $9 to its previous high of $53, Buffet will turn his $5bn into $35bn, or a return of 7x. Well, under that scenario, why don't you just buy BAC at $9 yourself. And when it hits $53, you'll make a 6x return. Just about as good as sly 'ol Buffet. Genius.
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