Buffett's BofA stake stirs memories for GE holders
News that Warren Buffett is riding to Bank of America Corp's
It was almost three years ago that the largest U.S. conglomerate turned to the famed head of Berkshire Hathaway Inc
Buffett's investment helped Fairfield, Connecticut-based GE sell another $12 billion in common stock, a critical capital infusion at a time when the overnight debt market that GE had relied heavily on had frozen up, investors said.
It's hard to remember now how desperate that situation was. They did need that kind of liquidity for that period of time, said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, which holds GE shares. Buffett stepping in did assuage a lot of fears. That would not have been an easy sell without his involvement.
GE NOW EAGER TO BUY BUFFETT OUT
Three years on, GE officials are eager to buy back not just Buffett's stake, which carries a hefty 10 percent annual dividend, but essentially all the shares it offered during the financial crisis. The company plans to buy back the Buffett stake in October.
I want to reduce the float, Immelt told a May investor conference in Florida. Over the next few years I'd like to get the float back down to where it was pre the offering in 2008.
As of the end of June, the world's largest maker of jet engines and electric turbines had repurchased $2.7 billion of its shares since July 2010, when the board reauthorized stock purchases. Buying back another 684 million shares, about 6.9 percent of the total outstanding, would hit Immelt's goal.
A week before his GE move, Buffett invested $5 billion in Goldman Sachs Group Inc
Investors say Buffett has profited handsomely from his GE investment -- over their three-year lifetime, the preferred shares will have paid $900 million in dividends. But he has not yet reaped every benefit his investment promised: He also received warrants to buy another $3 billion of GE common stock at $22.25 a share by October 2013, but those warrants have been under water since his initial investment.
While Buffett's investment was intended to boost confidence in GE, which he called at the time the symbol of American business to the world, it did not stop the slide in GE shares, which lost three-quarters of their value over the next six months to hit an 18-year low below $6.
The shares have since climbed back and stood at $15.54 in Thursday morning trading on the New York Stock Exchange. But that is still 36 percent below their close on the day of the Buffett deal. Over that time, the Standard & Poor's 500 index <.SPX> is up about 1.4 percent.
(Reporting by Scott Malone; editing by John Wallace)
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