Warrant Watch: Wells Fargo, Uncle Sam, Mr. Buffett (WFC, BRK-B, BRK-A)

Wells Fargo & Company (NYSE: WFC) is signaling that it can hold its own by buying out what could have been dilution from Uncle Sam selling warrants.  The Treasury will take in net proceeds of about $840.4 million from its sale of warrants, a ‘bonus’ for taxpayers, after selling the 110.3 million outstanding warrants.

Wells Fargo acquired 70.2 million warrants to buy its common stock in an auction conducted on behalf of the U.S. Treasury by Deutsche Bank Securities yesterday.  These warrants were issued by the company to the U.S. Treasury as part of its investment in Wells Fargo under the Capital Purchase Program.

Berkshire Hathaway Inc. (NYSE: BRK-B, BRK-A) is Wells Fargo’s largest holder and Warren Buffett has been Wells Fargo’s biggest fan during the bust.  It will be interesting to see if Mr. Buffett decided to participate in that auction to buy more Wells Fargo exposure on the cheap.

The price per warrant was $7.70, and the 70.2 million warrants acquired represent 63.6% of the 110.3 million outstanding warrants.   This is of course on top of the $25 billion repaid under the T.A.R.P.

Wells Fargo shares opened in negative territory at $28.06, but after the initial trades the stock in the first 20 minutes of trading is trading up 0.6% at $28.87 and we have already seen one-third of a normal trading day’s worth of share volume.  The 52-week range is now $21.57 to $34.25.

JON C. OGG