On Oct. 1, Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB) invested $5 billion in Goldman in return for 50,000 shares of 10% cumulative perpetual preferred stock and warrants to purchase 43,478,260 shares of common stock at $115 a share, a discount to the share’s closing price that day of $134.50.
Shares of Goldman recently traded at $163.60, giving Buffett a $2.11 billion paper profit on the warrants. He doesn’t need to be in a hurry to settle. The warrants expire in 2013 and can be exercised for an aggregate cost of $5 billion.
The jury is still out on a similar deal with General Electric Buffett executed two weeks later. That investment hasn’t performed as well, yet. Buffett bought perpetual preferred shares and warrants to purchase 134,831,460 shares of GE at $22.25 a share, above the closing price that day of $19.89. Shares of GE recently traded at $11.99.
As The Journal reported at the time, while Buffett’s decision to buy into Goldman in the autumn of 2008 was a vote of confidence in the firm, the deal was structured to protect him from losses. (The dividends from the preferred shares would hold steady even if Goldman’s stock tanked.) Happily, the shares didn’t tank and Warren can now afford a few more creamsicles.Related Links
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