Billionaire Warren Buffett will become one of the top 10 shareholders of the U.S. investment bank Goldman Sachs, having agreed to exchange warrants worth billions of dollars for Goldman Sachs stock, according to Reuters.
Under the terms of a transaction during the financial crisis in 2008, Buffett came in support of Goldman Sachs and the Berkshire Hathaway company acquired the rights to purchase 43.5 million shares of Goldman Sachs, about 9% of the shares of the Bank at a price of $115 per share, by October 1st.
Today, however, the two sides announced the revision of the agreement: Berkshire Hathaway will get from Goldman Sachs shares to reflect the difference between the warrants’ original price ($115) and the average closing price of Goldman Sachs’ stock for the 10 days up to October 1st.
Goldman Sachs shares closed session yesterday at $146.11, which means that the collateral held by Warren Buffett is worth $1.35 billion. At this price, Berkshire Hathaway owns about 9.3 million Goldman Sachs shares, becoming one of the top ten shareholders of the bank.
“We intend to maintain a significant investment in Goldman Sachs,” Buffett said in a statement. ” We are pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs,” said Lloyd Blankfein, Goldman Sachs Chief Executive Officer.
Berkshire Hathaway received these warrants in 2008 after investing five billion dollars in Goldman Sachs preferred shares. These stock options were granted an annual coupon of 10%, which means that Buffett has earned about $500 million a year in dividend alone. In March 2011, Goldman Sachs has redeemed the preferred shares from Buffett. Overall, from the premium and dividends, Buffett made a profit of almost $4.7 billion from the initial investment of five billion dollars in Goldman Sachs.
The shares represent 2% of Goldman Sachs outstanding stock. If Berkshire Hathaway would have exercised the warrants, it would have represented 9% of Goldman Sachs stock.
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