By
Godfrey Benjamin
April 23rd, 2024
It is reported that Warren Buffett wants to get permission from the Federal Reserve to increase Berkshire Hathaway’s stake in Bank of America.
Warren Buffett is causing yet another market buzz with his next line of action, and this time, his investor-compass is pointing again at the Bank of America. The seasoned investor wants to up his stake in the bank past 10%, and this planned move is already raising eyebrows.
Berkshire Hathaway, Buffett’s company, made it clear in a Fed filing that its intentions do not include any merger, selling of Bank of America assets or the introduction of a new business strategy, rather all it is after is simply an approval from the Federal Reserve to bump up its interest in the Bank of America over 10%.
A History Perfected With Time
Eight years ago, the Bank of America and Warren Buffett made an investment deal of $5 billion, which would, of course, be paid by Buffett. The investment was channeled into preferred warrants and stock. It served another purpose, which was to write a new narrative about the lender, who at the time was licking the wounds inflicted by subprime mortgage losses.
However, in 2017, Warren Buffett took a $16 billion-plus common-stock in the Bank of America in exchange for the preferred shares. Today, Bank of America is Berkshire Hathaway‘s second-largest equity investment priced at over $27 billion as of Monday, while Apple Inc. remains at the top position.
Will Berkshire Stop at 10%?
A positive response was observed in the shares of Bank of America. It spiked by 3.8% just as the news of the filing broke.
The 10% limit on bank ownership was put in place as a regulatory strategy, and it is closely monitored by US officials to ensure that it is not exceeded. Crossing the threshold may tilt the position of power to the shareholders, who may begin to influence lending activities.
One thing the application did not specify was the amount of shares Berkshire Hathaway would bargain for if given the go-ahead. The company stated that it “may decide to purchase additional shares of common stock of Bank of America based on its evaluation of the investment opportunity presented by such purchases.” Already, going by data from July 25, Berkshire has over 950 million shares in the Bank of America.
Warren Buffett Invests in Power Generation
Through the subsidiary, Berkshire Hathaway Energy, the billionaire investor Warren Buffett is pumping a capital of $200 million into a wind farm project which plans to supply 117.6 megawatts of electricity to southeastern Alberta next year.
Berkshire Hathaway Energy, based in Calgary, Canada, said the electricity project named Rattlesnake Ridge Wind plans to supply electricity to about 79,000 homes in the southwest of Medicine Hat.
BHE Canada also disclosed that it has gone into a long term agreement with an unnamed Canadian company for the purchase of the largest share of energy output from the Rattlesnake Ridge project.