

BoA Purchase Agreement from Berkshire Hathaway - feydr
http://www.sec.gov/Archives/edgar/data/70858/000119312511232422/dex11.htm

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AndyIngram
Wow, I was only slightly aware of the problems at BoA, but this deal must mean
that they were having a big problem raising money. You would think they could
of had a fire-sale of some assets like their china holdings to better protect
shareholders. That being said having Buffet show confidence in your firm is
valuable and it paid off well in the past for GE, Goldman and before that
Salomon Brothers.

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MikeCapone
If they were having real problems, Buffett wouldn't invest. He likes to buy
stock in solid companies that are going through temporary rough times and are
thus unloved by the market (selling at bargain prices, like American Express
after the salad oils scandal).

They were certainly having a problem of confidence, which can be very bad for
highly leveraged financials, and Buffett's reputation helped restore some
confidence.

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dmm
I thought BoA said they didn't need capital...

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juiceandjuice
BoA stocks have been taking what some economists have said to be an undeserved
hit in the market. Buffet probably thinks this as well, and decided stock was
cheap and the deal would be mutually beneficial.

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bradly
Yes. Many investors think BoA stock price is below book value. Meaning that if
they sold off all of their assets, that amount would be more the the number of
shares * stock price. It would look like Buffett agrees.

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waterlesscloud
From this it looks like he bought a series of Preferred stock created
especially for this deal. This is not what you or I could buy.

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xradionut
Maybe Warren thought BOA was a good investment now that Wikileak's BOA "hard
drive of secrets" has been "disappeared".

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Estragon
Not sure what you're referring to. Could you elaborate, please?

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pchristensen
A $5B investment, not an outright purchase.

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feydr
your right it's not an 'outright purchase' but it is a 'purchase agreement'

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chulipuli
Given the amount of capital that B&H needs to invest yearly, this is a natural
choice.

Buffet likes banks, he said so in the book The Snowball (a must read). Banks
have float, which is interest free money "floating around" waiting to be
invested by the bank, but not owned by the bank.

BOA also sells insurance, which has more float than a bank. B&H has a pretty
effective group of insurance business people. A lot of the B&H wealth comes
from the insurance industry.

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typicalrunt
That's one hell of a bet. I'm actually surprised that Buffet didn't want to
buy the bank's debt offerings (if there are any).

I haven't read past the first couple paragraphs (too much legalese) but is
there an out clause? If BoA tanks in the stock market, Berkshire could stand
to lose a lot of money on the common stock.

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MikeCapone
Buffett didn't buy the common, he only has warrants with 10 year expiration.
He bought preferreds at 6%, afaik.

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waterlesscloud
I liked this bit from a FT Alphaville post on the topic:

"Warren’s warrant exercise price — a Fibonacci-esque $7.14285"

(which is 5B divided by 700M,but it's a fun number anyway)

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mcantelon
First Goldman Sachs, now BoA. Stay classy, Warren.

