Berkshire Hathaway Inc. owned and operated by Warren Buffett is cutting its Wells Fargo & Co stake to less than 10% after it was told by the Federal Reserve that staying about that particular threshold would limit the ability it has to conduct business with the bank.
Berkshire sold over 7.1 million shares of its stake in Wells Fargo earlier this week and is planning to divest another 1.86 million shares soon, said the company, which is based in Omaha, Nebraska.
Berkshire held more than 500 million shares as of December 31 of last year that were valued at over $27 billion.
The recent sales have not been made due to valuation or investment considerations, said Berkshire in a prepared statement. Instead, they were motivated solely by the desire revert back to an ownership percentage that is less than 10%.
U.S. regulations have curtailed influence of outsiders in banks. Of the other four top lenders in the U.S., none claim one individual investor having the size of stake of Buffett in Wells Fargo.
Buffett, who is a billionaire, disclosed last year in a filing that the position held by Berkshire in Wells Fargo had climbed to over 10% because the bank was buying back so many shares of stock.
In the proxy filing made by Wells Fargo, Berkshire is listed as a major shareholder that has a business relationship with the ban in segments like lending, insurance and investment banking.
Berkshire in its own separate statement said that following a number of months of talks with Federal Reserve representatives, the company came to the conclusion that its commitments that the Federal Reserve would require to retain the 10% ownership or more stock of Wells Fargo would restrict in a material way commercial activity we have with the bank.
Berkshire last year applied to expand its stake beyond the 10% mark saying it did not have plans to merge the bank with another or make any changes of significance to the strategy of the lender or its corporate structure.
Buffett committed during the 1990s to be American Express Co. passive shareholder. His company’s stake in AmEx since has grown to over 17%.
In extended Wednesday trading, Wells Fargo fell 14 cents and Berkshire said it was preparing sufficient additional shares to remain under the limit set by the Fed.
Buffett, who is 86, has been a longtime fan of the Wells Fargo bank and made his first investment in the bank during 1989.