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Dec 19, 2018

Home Capital shares sink as Buffett to 'substantially exit' investment

Home Capital shares fall after Berkshire cuts stake to below 10%


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Almost a year and a half to the day since Warren Buffett stunned Bay Street by emerging as a major investor in Home Capital Group Inc. (HCG.TO), his company Berkshire Hathaway Inc. will now "substantially exit" its position in the alternative lender.

Toronto-based Home Capital confirmed Wednesday that it is buying back 18.2 million of its shares and said as a result of the substantial issuer bid, Berkshire's stake will fall below 10 per cent.

Berkshire entered the fray in June 2017 when a crisis of confidence was engulfing Home Capital, announcing that it would provide a $2-billion loan and acquire a 19.99 per cent stake in Home Capital. At the time, it also left the door open to an additional investment that would have boosted its stake to 38.39 per cent, but Home Capital's shareholders ultimately voted against allowing Berkshire to proceed with that tranche of the deal.

"We are delighted to see Home Capital back on its feet with healthy liquidity and a solid capital position," Buffett said in a release. 

"Berkshire’s investment in Home is now not of a size to justify our ongoing involvement. Although we have decided to substantially exit from our investment, we will continue to cheer from the sidelines for our friends at Home.”

Shares in Home Capital were down more than 12 per cent to $14.38 as of 1:05 p.m. ET on Wednesday.