https://finance.yahoo.com/m/f25ca3c1-62de-3853-9191-4d776238…
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That’s not even the whole story. Berkshire is up to 91 million OXY shares in addition to the 83.86 shares underlying the warrants that are nearly at the money. Warren is buying the huge blocks of OXY stock that Icahn is selling. A quick way to get a $10 Billion + position
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That’s not even the whole story. Berkshire is up to 91 million OXY shares in addition to the 83.86 shares underlying the warrants that are nearly at the money. Warren is buying the huge blocks of OXY stock that Icahn is selling. A quick way to get a $10 Billion + position
Here’s a helpful article on this, with a link to the latest SEC filing:
https://www.businessinsider.in/stock-market/news/warren-buff…
https://www.sec.gov/Archives/edgar/data/315090/0000899243220…
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I would think that it is possible taht BRK has been buying other oil companies as well?
Here’s a helpful article on this, with a link to the latest SEC filing:
https://www.businessinsider.in/stock-market/news/warren-buff……
Hmmm, helpful once you get past the confusion of reading 2 articles in one, the first being about the recently revealed OXY stake, and the second (written in 2020) where Icahn ventilates about how generous the $10B preferred+warrants was for Berkshire:
Berkshire already owns 100,000 preferred shares in Occidental, reflecting a $10 billion investment in the oil-and-gas company to help fund its takeover of Anadarko Petroleum in 2019. The preferred shares pay an 8% annual dividend, or $800 million a year.
Buffett’s company also holds warrants for 83.9 million common shares, with an exercise price of $59.62, thanks to its previous investment. However, Occidental’s stock closed at $56.15 on Friday, meaning the warrants are “out of the money” for now. If Occidental’s stock price rises above the exercise price, Berkshire can use its warrants to purchase shares at a discount, then sell them at the market price and make a profit.
If Berkshire hangs on to its newly purchased stock until it exercises its warrants, and doesn’t sell the resulting shares either, it would have 175 million common shares — worth over $10 billion at the exercise price.
Carl Icahn, another billionaire investor and Occidental shareholder, blasted the preferred stock and warrants as far too generous to Berkshire.
“Buffett figuratively took her to the cleaners,” he complained at the time, referring to Occidental CEO Vicki Hollub. “The Buffett deal was like taking candy from a baby and amazingly she even thanked him publicly for it.”
However, Buffett seemed worried about his investment at Berkshire’s annual shareholder meeting in 2020, when the price of West Texas Intermediate crude had slumped to below $30 a barrel.
“If you’re an Oxy shareholder, or any shareholder in any oil-producing company, you’ll join me in having made a mistake so far in terms of where oil prices went,” he said. “Who knows where they go in the future?”
WTI crude has soared more than 50% to a seven-year high of $115 this year, fueled by concerns about supply disruptions due to Russia’s invasion of Ukraine.
The part I put in bold is the part that doesn’t belong in yesterday’s article. OK, they modified it slightly by adding ‘at the time’, but most readers will probably have to read it twice to understand that Icahn is not talking about the stock purchased just announced, but rather to the preferred shares purchased 2 years ago…
Regards, dtb
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Buffett could have bought OXY stocks at a fraction of the cost during the past two years. Why now?
By the way, footnote 18 to the SEC report which is the 2nd link RAS337 provided explains that the warrant issue that I feared would devalue the warrants did no such thing:
The warrants contain provisions that adjust the exercise price and the number of shares of the issuer’s common stock issuable on exercise upon the occurrence of certain events. As such, the exercise price and the number of shares of the issuer’s common stock issuable on exercise as reported on this form are subject to change upon the occurrence of future events in accordance with the terms of the warrants. The warrants were initially for 80,000,000 shares with an initial exercise price of $62.50 per share. On June 26, 2020, the issuer’s board of directors declared a distribution to its common shareholders of warrants to purchase additional shares of common stock, which distribution resulted in an anti-dilution adjustment to the warrants, which lowered the exercise price to $59.624 and increased the number of shares issuable on exercise of the warrants to 83,858,848.81.
This also explains why the nice round numbers have disappeared: originally 80m shares at $62.50 (i.e. $5b), now 83.9m shares at $59.62 (still $5b.) So if Berkshire converts for shares in 7 years, it would own 83.9m shares plus the 91m shares it just bought, 175m shares in all, plus any other shares it might buy in the meantime. At current prices, that would be a hair short of $10b, or the sixth biggest stock holding, after AAPL, BAC, AXP, KO and KHC.
dtb
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Perhaps he thinks that Russian oil will be off the market for an extended period of time. Perhaps he thinks natural gas has a longer and slower decline curve in the U.S…
There are many other possibilities,that’s why he gets the big money.
JK
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Buffett could have bought OXY stocks at a fraction of the cost during the past two years. Why now?
Who knows? I hope Buffett is keeping notes about why he buys, and sells, and buys back, shares of a number of companies, which of course he doesn’t explain to us in real time but which we Buffett-watchers love to speculate about and would love to know some day. One can always dream.
But in fact, it’s worse: Berkshire made 2 stock purchases for 7.5m shares and 11.5m shares, in Q3 and Q4 of 2019 respectively, and sold all 18.9m in Q2 of 2020. The shares traded between about $18 and $13 in that quarter.
I believe those were not really purchases, but rather 2 quarterly dividend payment (they’re $200m each quarter) which the provisions of their preferred deal allow Occidental to pay its dividend in shares in lieu of cash.
You have to wonder why Buffett sells stakes like these, when the company is already drowning in cash. Not that an extra $400m makes much difference in the greater scheme of things. But if he liked the management and the long-term prospects of an oil company in 2019, and now again in 2022, what was he thinking in 2020?
dtb
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Why now?
Buying shares that you sold at lower price, while many consider it as a mistake, I consider it as a strength of sophisticated investor. We all can safely agree WEB is a very smart investor. Given the war, and a potential for Russian oil out of the market, or out of western market, He could think in the short-term (a sustained higher price will bring Saudi capacity, US shale capacity etc), Oil prices could rally and he could make a quick buck on this trade.
WE don’t know, everyone’s opinion is a speculation. Price anchoring is a mistake you should learn to avoid.
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I love the OXY addition and the warrants, not to mention the $800M/ year from the 2019 loan. Hope they turn out like those BAC warrants executed 5 years ago. Btw, I must confess I coat tailed into OXY in a small way in 2019 and got shaken out with a 30% loss in a few months. Glad Buffett is now making up for my impulsive trade, lack of due diligence and impatience!
These situations are one of 100 reasons I feel fortunate to be a BRK owner and get the same proportionate outcome as WEB himself! He sees the future so well with such risk control.
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"Warren Buffett plowed $4.5 billion into Occidental Petroleum in 5 days. He pounced after reading its latest earnings-call transcript. He told CNBC.
"
https://www.yahoo.com/finance/news/warren-buffett-plowed-4-5…
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Who knows? I hope Buffett is keeping notes about why he buys, and sells, and buys back, shares of a number of companies, which of course he doesn’t explain to us in real time but which we Buffett-watchers love to speculate about and would love to know some day. One can always dream.
I think we can stop dreaming. Unlike his mentor, Buffett is not a real teacher. He will never reveal the exact reasoning. He values others’ blind hero worship of him too much.
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“I think we can stop dreaming. Unlike his mentor, Buffett is not a real teacher. He will never reveal the exact reasoning. He values others’ blind hero worship of him too much.”
What details of Buffett’s biography led you to this conclusion?
Shortly ago another poster: Munger … idiot
Now: Buffett … He values others’ blind hero worship of him
Poor boys. What did they do to deserve this?
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You don’t need to do deep research, there are many pointed questions to WEB on his methodology, how he selected, etc. He directly declined and said something like he works for Berkshire Shareholders.
Buffett very carefully cultivated an image, but his actions are very different from those image. As long as he is successful and given his massive holding in Berkshire, he knows he has total freedom to do as he pleases. He enjoys and uses his freedom to the utmost.
“Buffett very carefully cultivated an image, but his actions are very different from those image. As long as he is successful and given his massive holding in Berkshire, he knows he has total freedom to do as he pleases. He enjoys and uses his freedom to the utmost.”
The audience goes…boooooooooooo!
jk
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