Skip to main content
No. of Recommendations: 2

I made an assertion in this thread that Buffet effectively paid only $2.34B for preferred stock with a par value of $5B.

According to BAC's recent 10Q, On September 1, 2011, the Corporation closed the sale to Berkshire of 50,000 shares of the Series T Preferred Stock and the Warrant for an aggregate purchase price of $5.0 billion in cash. Of the $5.0 billion in cash proceeds, $2.9 billion was allocated to preferred stock and $2.1 billion to the Warrant on a relative fair value basis. The discount on the Series T Preferred Stock is not subject to accretion. The portion of the proceeds allocated to the Warrant was recorded as additional paid-in capital.

I stand corrected. Buffet received $5B in preferred stock for $2.9B. With a 6% coupon, his effective yield is only 10.34% according to BAC's math... :-)

Of course the preferreds can be redeemed at face value when exercising the warrants as well, so the yield to maturity is actually going to be much higher than 10.34%.

Way to go Buffet...

- Joel
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.