Bank of America Corporation’s shares BAC, -0.25% rose 1% in premarket trade recently after Warren Berkshire announced that it will exercise the warrants to purchase 700 million shares of the bank’s common stock.
Warrants exercised by Warren Buffett’s Berkshire Hathaway for purchasing 700 million shares of the Bank of America recently. It happened because the America’s dividend increase took place. The prices of exercising these warrants would be around $7.14 per share. This is 71% below the closing price of the previous day, where price was $24.32. so, the 700 million shares of Bank of America would simply represent about 7.0% of the outstanding shares. After all this was said, it is believed that Berkshire would probably become the largest shareholder in the shares of Bank of America.
Berkshire announced that it will utilize its $5 billion worth of 6% preferred Bank of America stock as deliberation to purchase the common stock. The warrants to buy the common stocks were received by Berkshire back in 2011 when it purchased the preferred stock. The stock has rallied 10.1% until date while the financial select sector ETF of SPDR has dipped down on 6.2% and the S&P 500 has gained 8.1%.
It seem that this change in the prices and the shares of Bank of America would definitely make Berkshire one of the top shareholders in the shares. All the warrants has been received and the benefits are availed.