Warren Buffett, Goldman Sachs: In a 13G filing just reported with the SEC, Warren Buffett and Berkshire Hathaway reported a 2.8% stake in Goldman Sachs Group Inc (NYSE:GS). The total position of 13,062,594 shares represents $1.99 billion worth of Goldman stock, and came via warrants bought in 2008.
The relationship between Buffett and Goldman Sachs can be traced back to 2008, when Berkshire played a crucial role in rescuing the bank through the offering of a $5 billion lifeline, which aside from warrants also provided Berkshire with $5 billion worth of preferred stock with $500 million annual dividend.
Buffett could have bought 43.5 million shares of Goldman Sachs at a price of $115 per share, until October 1. However, in March the parties renegotiated the deal, which provided that Berkshire would get an amount of Goldman Sachs shares representing the difference between the average closing price for 10 days until October 1, and the exercise price, times 43.5 million. Buffett said this in March:
“We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago, [...] I have been privileged to have known and admired Goldman’s executive leadership team since my first meeting with Sidney Weinberg in 1940.”
In this way, Buffett and Berkshire not just became one of the largest shareholders of Goldman Sachs, but also saved a ton of money they would’ve spent as transaction costs if Buffett decided to exercise the warrants and sell the shares for a profit.