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September 24, 2008
Buffett Steals Goldman Stock
Buffet bought $5 b in Goldman Sachs preferred stock, giving him close to 62% of all the Goldman preferred stock outstanding. The catch, he gets a 10% dividend (above the market rate for preferred stock recently issued by investment banks. Moreover, he gets an in-the-money warrant on common stock worth $1.8 B, so he is really buying the preferred stock for $3.2B with a 10% dividend on $5B. His warrant is for $5B of common at an exercise price of $115; the stock is trading at $125 a share. If he exercises the warrant he will hold 6% of the common as well as 62% of the preferred. Contrast Buffet's deal with our $700B effort to pay above market prices for MBSs. Can we swap Buffet for Paulsen??
September 24, 2008 | Permalink
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