Wednesday, September 24, 2008

Buffet & GS


Berkshire Hathaway will buy $5 billion of perpetual preferred stock

The coupon will be 10%, it is callable anytime at a 10% premium

Berkshire will also receive 5 year warrants to buy roughly 43.5 million shares @ $115.00

So, Buffet can double his money in 7 years on the preferred shares alone if the market is flat and he participates on the upside. On the downside, he is clearly depending on the acquisition fund to support the overall market.

Separately, GS will sell $2.5 - $5.0 billion in common shares to solidify their equity position.

(Totally separate, Capital One Financial will sell 14 million shares today. So Goldman & Cap One can sell short their own shares but I can't?)

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