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Buffett's Goldman Deal Is No Charity

First Posted: 09-24-08 07:39 AM   |   Updated: 10-25-08 05:12 AM

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Warren Buffett

Still, Mr. Buffett is not taking big risks based on the structure of the investment.

Berkshire Hathaway will receive perpetual preferred shares in Goldman, which will pay a 10 annual percent dividend, or $500 million a year. Those dividends take precedence over other payments to common shareholders. Goldman has the right to buy back the shares at any time for a premium of 10 percent.

In addition, Berkshire Hathaway will receive warrants to buy $5 billion in common stock at a strike price of $115 a share, which can be used at any time in a five-year period. Those warrants are already in the money: Goldman shares closed Tuesday at $125.05, up $4.27, and rose to $134.75 in after-hours trading after Mr. Buffett's investment was announced.

Filed by Dave Burdick  |  Report Corrections