Berkshire Hathaway’s investment in Goldman Sachs at the height of the financial crisis represented a major vote of confidence that enabled Goldman to raise additional equity from investors. The September 2008 deal involved $5 billion in Goldman Sachs perpetual preferred stock along with five year warrants to purchase approximately 43.5 million shares of Goldman common stock at $115 per share. The preferred stock carries a dividend rate of 10% and is callable at any time at a 10% premium. Despite the recent drop in Goldman Sachs common stock, Berkshire’s warrants remain in the money. While Goldman could almost surely refinance Berkshire’s $5 billion investment at a lower rate, having Warren Buffett’s endorsement in the current environment may be priceless. Read this article for more details.
In the Fortune magazine interview shown below, Goldman Sachs CEO Lloyd Blankfein provides his insights on the overall economy, prospects for job growth, and the controversy surrounding his firm’s compensation practices. Read this article for some background information and to view the video.
While the strong first quarter results posted by Goldman Sachs on Monday seemed to surprise most observers, it really comes as no surprise that the firm is now seeking to free itself from the shackles of the TARP financing that it was essentially forced to accept in October 2008. The $5 billion common stock offering announced today will allow Goldman Sachs to retire part of the TARP funding, subject to government approval.