Buffett, Goldman Rework Warrants

It’s good to be Warren Buffett. Back when the world was melting down, Berkshire Hathaway ($BRKA) bought warrants that gave them the right to buy 43.5 million shares of Goldman Sachs ($GS) at $115 each. These warrants expire on October 1st of this year. Shares of Goldman are now up to $147 apiece.

Goldman and Buffett are reworking the deal so instead of Buffett getting the difference between $115 and $147 in cash, he’ll get it in more stock. This is interesting first two reasons. One is that Buffett doesn’t want cash. I can’t blame him since interest rates are so low. Even Goldman’s lowly dividend of 1.4% looks good. The other reason is that Buffett is sticking with banks; more specifically, large banks. He already owns a big portion of Wells Fargo ($WFC) but he obviously sees no problem with sticking by Goldman a while longer.

Update: It looks like I had this wrong. Apparently, Buffett is only getting the number of shares worth the profit of those warrants. That will probably work out to about nine million shares. So instead of paying $5 billion to get $6.3 billion in stock, he’s paying nothing to get $1.3 billion in stock.

Posted by on March 26th, 2013 at 10:04 am


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