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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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