Warren Buffett's Berkshire Hathaway Inc. (BRK.A) - Get Report announced that it will be purchasing 700 million shares of Bank of America Corp. (BAC) - Get Report at below market price, making the investment firm Bank of America's largest shareholder.
Berkshire will use $5 billion worth of preferred shares to complete the purchase at $7.14 per common share, well below the bank's previous closing price of $24.32 per share.
As part of its annual stress test, the Federal Reserve approved Bank of America's 60% dividend hike to 48 cents per share annually, as well as its plan to buy back $12.9 billion in stock.
The backstory to this news is vintage Buffett.
In August of 2011, Warren Buffett's Berkshire Hathaway purchased $5 billion in Bank of America's preferred stock. The shares carried a 6 percent dividend, which paid Berkshire about $300 million annually. The deal's biggest prize was a warrant allowing Buffett to buy 700 million shares of the bank at $7.14 each until September of 2021.
"We would keep the stock [Bank of America's]," Buffett told shareholders at Berkshire Hathaway's annual meeting in May. The comment pertained to what Buffett would do with Bank of America shares if the warrant were to expire that day.
Bank of America's shares were up 0.7% to $24.49 on Friday morning.
What's Hot On TheStreet
Get ready Tesla fanboys: Tesla Inc. (TSLA) - Get Report CEO Elon Musk said Friday there would be "news on Sunday" about the company's much anticipated Model 3. While that's all fine and good, what Musk won't tell people is how his electric car company may be speeding toward a monopoly.
With the advance of self-driving vehicles, Tony Hughes, managing director at Moody's Analytics, argued it is not the cars themselves that could lead to the decline in the automotive industry but ride-sharing services like Uber or Lyft. The plan CEO Elon Musk has laid out to create a fleet of self-driving Tesla vehicles for ride-sharing purposes could be the way to save automakers from a demise.
A VIP gives his market outlook: Nobel Prize winning-economist Robert Shiller told TheStreet's Anders Keitz that U.S. equities markets are "quite high" currently but may go even higher in coming months, and that's why he's not exiting the market completely. Indeed there's another thing that could have an unpredictable effect on the market Shiller explains: The narrative around Donald Trump.
"Short-run forecasting of the market is very hard," said Shiller. "I think it's a time for caution, but it could go up substantially."
Apple iPhone 8 pictures leak: Apple's (AAPL) - Get Report iPhone 8 looks kind of cool. That is if yet another photo leak is to be believed. Noted Apple information leaker Benjamin Geskin tweeted photos of an alleged iPhone 8 finished prototype on Thursday evening (head here to see). Suffice it to say, Apple is gearing up for the mother of all product launches. And consumers look ready to respond.
About 92% of iPhone owners say they are "somewhat likely or "extremely likely" to upgrade their smartphone in the next 12 months, according to a note from Morgan Stanley. The loyalty rate is up sharply from 86% one year ago.
Nike managed to excite Wall Street: After a major restructuring announcement, Nike (NKE) - Get Report was able to boost Wall Street's views on the company's prospects. On an earnings call Thursday evening, Mark Parker, Nike CEO and board chairman, said its pricey new Air VaporMax sneakers drove sales in the quarter and that there will be new styles coming to the brand sometime this summer. There are also "a few more surprises along the way," Parker said.
As TheStreet's Lindsay Rittenhouse reports, Nike also confirmed that it teamed up with Amazon (AMZN) - Get Report to sell certain products on the e-commerce conglomerate's site. The company is also selling directly to consumers via Instagram.
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