Warren Buffett To Invest $3B In GE, Similar Perks To His Goldman Deal

GE today announced plans to offer at least $12 billion of common stock to the public. The underwriters will have a 30-day option to purchase shares representing an additional 15%of the offering amount from GE to cover over allotments, if any. The offering is expected to be priced prior to tomorrow's market open in the U.S.

In addition, GE announced that it has reached agreement to sell $3 billion of perpetual preferred stock in a private offering to Berkshire Hathaway, Inc. The perpetual preferred stock has a dividend of 10% and is callable after three years at a 10% premium. In conjunction with this offering, Berkshire Hathaway will also receive warrants to purchase $3 billion of common stock with a strike price of $22.25 per share, which is exercisable at any time for a five-year term.

Read the full story here

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::HuffPost bloggers think this type of investment is a model for an alternative bailout ban
::Read about Buffett's Goldman Sachs deal and why analysts think neither that nor this Berkshire Hathaway GE deal is charity work.

Comments

[motley2]

Telling Warren Buffett not to make money would be like telling Jeff Koons not to make art (and lots of money). He's an investment savant. Besides, he'll probably pull a Carnegie and endow the heck out of some semi-noble cause.

[Furby]

But then again, we could really do without another Koons out there, couldn't we. I've seen better graffiti in the firehall bathroom.

[USAFree1]

The hell with Warren Buffet. He made all his money by moving money around. He's never made a damn THING. Put someone in charge who makes things here in the good ole USA.

[Hufferton]

Agree.

Just a paper money tiger.

[jrb35]

If it weren't for venture capitalists like Buffett, those jobs you speak of wouldn't exist. Try to learn a thing or two about economics 101 before you slander the guy.

[GeoLee]

Yes and the majority of the companies he has put stock in over the years are American companies which still employ American workers. His money provided venture capital often for businesses in the early stages that are now employing many people. There are a lot of people who assist this society who "don't make a damn thing" who are very important to our society: Physicians, Teachers, Ministers, Morticians, Home Repair workers, Salespersons, Hotel Maids, Child Care Workers, Mental Health Workers, Athletes, Entertainers ...you get the point? Our country is better because we have Thinkers, Doers, Innovaters, Motivators, Supporters and Consumers, all of which are integral to having a well oiled thriving country..

[GeoLee]

I do not know if my last response is being withheld or what, but I used quotes around your phrase "he never made a d**n thing" and maybe that is why. What Warren Buffet did to early in his career was to buy stocks and put in venture capital that helped AMERICAN business grow and employ more and more workers. However to your point that he didn't make anything: if that is the criteria for value of people to our society it appears to me you can live with a society without Physicians, Salespersons, Teachers, Ministers, Bankers, Investors, Professional Atheletes and Entertainers, Hotel Workers, Nurses, Home Repair people, Engineers (both those who design and those who guide the trains carrying all the goods those people you value made), Truckers, Musicians, Child Care Workers, Volunteers, Mental Health Providers, ...you get the picture? Our society is better because we have all kinds of people. It takes innovators, supporters, consumers, producers, thinkers, creators, doers, motivators, educators all to have a well functioning society. Yours, however, whould be a greatly lacking one.

[iambusto]

Buffett is quite a charitable guy, and he is a great investor. What he is not is a charitable investor. ha ha.

10% interest on preferred perpetual, can be converted at 10% premium. whats not to like.

Never seen a company bent over a barrell by a nicer guy. hehe :) Still GE wins because if they had to go to the market at this time, they would be screwed.

Other companies like AT&T, GM wont be lucky when they need capital markets. Caterpillar had to access capital market recently and are paying through the nose (i think 10%).

Wait till any of you guys go to the market for home loans/college loans/ car loans. Ford just reported a drop of 34% because no car loans means no car sales. Only 22% of the car loans were approved this year.

but hey, i am just a fearmonger.

[fredlonsdale]

GE is going to the equity market to raise 12 billion.

[fredlonsdale]

Underwritten by Goldman Sachs (Sp)

[johnnygoodwud]

sweet deal, invest in berkshire and get your piece of the pie.

[wigcon]

He has too many billions. He needs to invest in a sustainable industry and not in a nuclear company.

[cank]

http://www.nytimes.com/2008/09/30/business/worldbusiness/30battery.html?ref=business

[realitycheck7]

I recently heard that 3 Billion dollars is the amount it would take to feed every hungry child on earth

of course who am I to tell Buffet he shouldn't be able to make just a little more money

[fredlonsdale]

Not to long ago Buffet gave a whole bunch of money to Bill and Melinda Gates charitable foundation. So, I don't think one should view him as too selfish.

[realitycheck7]

The country's second richest man gave money to the country's first richest man in the form of a tax shelter.

Excuse while I continue to be unimpressed

[GetoffMylawn]

Warren actually does a lot of good things with his money.
Check it out.

"I don't have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It's like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die."
--Warren Buffett

[Veritas 1]

What is the old saying: "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."

[realitycheck7]

where is this teaching going on?

[Anastasia]

Hmmm...... Why GE?

[fredlonsdale]

From his past actions and statements, he buys businesses he understands, that are successful and whose management he trusts. He lets the existing management stay, sits back and reaps the profits.

I own a little bit of GE, so I am not exactly unhappy that he bought into the company. Now if he could just shut up Jack Welch, it would be great.

[LeeCalif]

I so wish Youtube posted stuff WAS DATED !!!!!!!

[bigdaddyvike]

What's he got to lose? His bucks aren't going to go anywhere because we'll reimburse him. This is so transparent.

[jrb35]

That's not how the bailout in any of its forms will work.

[Golfer59]

Buffett knows when he sees a "Cash Buffet".

[OpusIsUnderTheBed]

With a lot of cash, it's easy to make a lot more, now and in future, from solid companies feeling pressure.

[klo]

He's making a mint.

[RebelPatriot]

Ask Buffet about the billions he has bet on PUTS on the market. He has a lot - A LOT - riding on the fact that the Congress will pass the Bailout. He is not be altruistic.

He has $5 billions in preferred stock with Goldman-Sacks, but - BUT - remember back... he bought about $5 Billion in PUTS on the S&P 500. Previously, he called these Financial Weapons of Mass Destruction.

http://www.nowpublic.com/world/financial-weapons-mass-destruction

Please watch Karl Denninger explain how Buffet is gaming the system, hoping to squeeze out your tax dollars to enrich himself.

http://www.youtube.com/watch?v=Mz4Yw8ci0rY&feature=user

[All in All]

Here's a Quote that Mr.Buffet made during that interview on CNBC a few moments ago,it goes something like this;Warren Buffet: "A smart Person can't go broke, unless that Person buys things using borrowed Money.", "That's why I (Warren Buffet) only buy things with My Own Money, I (Warren Buffet) can't & wouldn't rely on Banks in these times of the Global Market!", "Sure using credit can make a Person/s Rich fast, however using Credit will make a Person/s Poor even faster"!

Does anyone understand the full context of what Warren Buffet said in that statement, and if You do.. then surely People should see part of the reason why Warren Buffet & People such as Him would want Our Government to buy up all the "bad assets in most of the Market", while Warren Buffet & others buy most of the better assets in the Market (on the other hand),Smile....

Since Warren Buffet is the smart Person, what does that make the People in Our Government whom wants to Buy-Up all of the Toxic-Poor-Low value Assets then......

[WIpatriot]

Criminals.

[Carolab]

Warren Buffett: From Value Investor to Vulture Investor

http://www.slate.com/id/2070452/

Seems like Warren is benefitting from "shock doctrine" economics. And what was going on at Offutt AFB on 9/11, anyway?

[Carolab]

Warren Buffett: From Value Investor to Vulture Investor

http://www.slate.com/id/2070452/

Seems like Warren is benefitting from "shock doctrine" economics.

[KillTheMessenger]

You might have a hard time proving what you just said. As far as I know they already got out of some of their S&P portfolio, at a significant loss. Which they can now deduct from the significant earnings on their other holdings. It's probably going to be a wash and I am not worried about them.

My own 401k is most likely going to take a bigger hit than Warren Buffet will when this sucker goes down.

You are right. Buffet is not an altruist. Those people usually don't make billions. OTOH, he has nothing riding on this, either. His job is less on the line than yours.

[RebelPatriot]

Buffets Puts on the S&P 500

http://www.berkshirehathaway.com/2007ar/2007ar.pdf

page 17 for the evidence.

Buffet explains that he has sold $4.5 billion worth of long-term puts on 4 different major stock indices (S&P 500 as well as 3 foreign exchanges). The strike price on the contracts is current market values, and they do not expire until around 2019-2027 (they are also European style meaning they cannot be exercised before expiration). This means that Buffet collects $4.5 billion which he gets to invest for the next 15 years. The only way he loses money is if the S&P and these other indices are lower 15 years from now... then he will be obliged to "buy" them back at today's prices. Despite the near-term turmoil that lies ahead, inflation alone should push these markets higher over the next 15 years.

You invest $4.5 billion for 15 years and earn an average of 10% (which Buffet can probably do), then you end up with roughly $16.65 billion after taxes!! I am not an options pricing expert, but I imagine the monetary obligations of these contracts could be figured out through reverse-engineering. Also, since these are put options, the potential losses are capped by the worst-case scenario of the markets going to 0. If I could sell put options for 15 years in the future, I certainly would be doing that

[Phil Waste]

Nationalize Warren Buffett and Bill Gates, they are only two people. We sacrifice them, use their money, and buy up all the bad paper, problem solved. Hey! Maybe they can sell it later for a profit. We can sacrifice just two guys to save the rest of us. RIGHT! They should be proud to give their all, like so many others have to defend their right to get rich. After all, we are only asking for their money not their lives like Bush has done over and over. Over 4,000 dead in Iraq!

[jrb35]

Yeah, because communism worked so well for the Russian economy. What a joke.

[Phil Waste]

If that's not enough we could Nationalize Bill Gates and that should be enough to cure the liquidity problem.

[KillTheMessenger]

??? Bill Gates has less than 1 percent of the kind of money needed to stabilize this market. You can nationalize all the money from all the billionaires in the US and you would still be short by a chunk which is probably worth more than the whole real estate value of Manhattan.

[robotfog]

maybe we can nationalize Manhattan?