Banking & Finance

Buffett's Ambition In Goldman Sachs (BRK-A, GS)

Buffett_imageGoldman_sachs_logoBillionaire and esteemed investor Warren Buffett has made a major move.  Berkshire Hathaway Inc. (NYSE: BRK-A) is investing some $5 billion in Goldman Sachs Group Inc. (NYSE: GS).  His stake is in preferred stock rather than in common stock, but he is also getting a warrant to buy $5 billion worth of common stock.  In addition, Goldman Sachs announced yesterday that it would raise another $2.5 billion in a public stock offering.

Buffett called Goldman Sachs an exceptional institution with anunrivaled global franchise and a proven and deep managementteam.  He was just said on CNBC he decided to write a check since there is no better firm onWall Street.  Buffett noted that if thegovernment wasn’t going to act he might be trying to unwind thingsrather than add things because we were on the verge of the worst movein our lifetime without a bailout. Buffett also noted that this bailout is not comparable to the RTC. He also said that he has no idea what the stock market will do short-term, but 5 or 10 years down the road we will look at this period as one where we could have made a significant amount of money.

Here are Buffett’s full stock holdingsas of his last filing.  The day of the week with a “W” is usuallyWednesday.  But today it is “Warrenday” as his efforts are stabilizingthe financial stocks and the market today more than the details of this$700 billion bailout package.

As far as what Buffett gets, it is pretty simple.  The preferred stock has a dividend of 10% and is callable at any time at a 10% premium. Berkshire Hathaway will also receive warrants to purchase $5 billion of common stock with a strike price of $115.00 per share, which are exercisable for a five-year term.

Goldman Sachs shares were up almost $10.00 at $134.50 in pre-markettrading earlier this morning.  Shares as of 8:15 AM EST are trading at$132.22 in active trading.

Jon C. Ogg
September 24, 2008