Warren Buffett's Berkshire Hathaway is allowed to double its Bank of America stake to almost 25%
- Warren Buffett's Berkshire Hathaway has permission to more than double its Bank of America stake to 24.9%, a spokesperson for the Federal Reserve's Richmond, Virginia outpost told Business Insider this week.
- The billionaire investor's company bought about $1.7 billion of the bank's stock in the last two weeks of July, lifting its ownership to 11.8%.
- The Richmond Fed approved Berkshire's application to raise its 10% ownership limit in April.
- However, Berkshire will have to file to become a bank-holding company if it wants to own 25% or more of Bank of America.
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Warren Buffett's Berkshire Hathaway has the green light to more than double its Bank of America stake to 24.9%, a spokesperson for the Federal Reserve Bank of Richmond told Business Insider this week.
The famed investor's conglomerate spent about $1.7 billion on the bank's shares in the space of nine trading days in July, boosting its ownership to 11.8% — a position worth more than $25 billion based on Bank of America's closing share price on Monday.
Berkshire made those purchases after seeking permission from the Richmond Fed to exceed the typical 10% ownership limit for investors. The regulator approved its application in April, a spokesperson said.
If Buffett wants to boost his stake beyond 24.9%, he will have to file for Berkshire to become a bank-holding company, the Richmond Fed spokesperson added.
Berkshire's increased ownership limit was first reported by Barrons.
Berkshire is Bank of America's biggest shareholder, and Bank of America is the second-largest holding in Berkshire's stock portfolio after Apple.
Buffett first invested in the bank in 2011, when he bought $5 billion of preferred stock paying a 6% annual dividend, and received warrants to buy 700 million common shares at $7.14 per share at any point over the next decade.
The investor exercised the warrants in August 2017, selling almost all of his preferred stock to cover the cost. Bank of America shares were trading at about $24 at the time, valuing his new shares at close to $17 billion — an immediate $12 billion gain.
Buffett's latest purchases of Bank of America stock came shortly after Berkshire struck a $10 billion deal to acquire most of Dominion Energy's natural-gas assets, and probably repurchased more than $5 billion of its own stock.
The spending spree suggests Buffett is spotting bargains again after a prolonged period of inactivity following the coronavirus crash.