Buffett to take major Goldman Sachs stake in warrant deal

Warren Buffett

Warren Buffett will become one of Goldman Sachs' ten largest shareholders essentially for free, after he and the bank amended a 2008 deal to exchange his potential profit on Goldman warrants for stock.

The exchange, which Goldman detailed on Tuesday, saves Buffett billions of dollars in upfront costs and lets Goldman minimize dilution to its stock. Under a 2008 deal, Buffett had held the right to acquire about 43.5 million shares of stock at an exercise price of $115.

Goldman said it will now give Berkshire shares reflecting the difference between the warrants' original exercise price of $115 and the average closing price of Goldman's stock for the 10 trading days up to Oct. 1.

Goldman shares rose 0.9 percent to $147.43 in early trading.

At that price, the structure of the deal implies that Berkshire would receive 9.6 million Goldman shares. That would make Buffett the ninth-largest investor in the firm, according to Thomson Reuters data.

"We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs," Goldman Sachs Chief Executive Lloyd Blankfein said in a statement.

Buffett, in the same statement, affirmed that Berkshire intended to retain a "significant investment" in Goldman.

The new shares represent about 2 percent of Goldman's outstanding stock as of mid-February. Had Buffett fully exercised the warrants, it would have represented about 9 percent of Goldman's stock.

The deal is "all good for Goldman," said Glenn Schorr, an analyst at Nomura who covers the bank.

Buffett's implied stake was already included in Goldman's fully diluted sharecount, said Schorr, who added: "And who wouldn't want (Warren Buffett) as a larger, long term shareholder?"

Vote of Confidence

Berkshire received the warrants in 2008 after investing in Goldman during the depths of the financial crisis, in what was seen, at the time, as a vote of confidence in the bank.

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views, opinions and comments posted are your, and are not endorsed by this website. You shall be solely responsible for the comment posted here. The website reserves the right to delete, reject, or otherwise remove any views, opinions and comments posted or part thereof. You shall ensure that the comment is not inflammatory, abusive, derogatory, defamatory &/or obscene, or contain pornographic matter and/or does not constitute hate mail, or violate privacy of any person (s) or breach confidentiality or otherwise is illegal, immoral or contrary to public policy. Nor should it contain anything infringing copyright &/or intellectual property rights of any person(s).
comments powered by Disqus