Buffett Sells Portion Of Stake In Salomon

Investors gave Salomon Inc. a vote of no confidence Thursday after Warren Buffett, the investment bank’s largest shareholder and recent rescuer, announced plans to partly cash out.

Buffett, whose every move is scrutinized for signs of where other investors should put their money, opted to cash in $140 million of preferred Salomon shares rather than convert them to common stock.

Salomon stock immediately dropped nearly 6 percent on the news - even though it was announced in a report by Salomon of unexpectedly strong earnings in the third quarter. The stock recovered somewhat by afternoon, trading down $1.75 at $38.37-1/2 on the New York Stock Exchange.

The decision by the legendary multibillionaire raised questions about Buffett’s long-term view of the troubled investment bank, which is struggling to recover from several money-losing quarters, defections of valuable employees and repeated bookkeeping snafus.

Following a 1990 Treasury auction scandal at Salomon, Buffett stepped in to temporarily run the firm. He revamped management, installed new controls and generally helped restore Salomon’s credibility with the investment community.