Warren Buffett's $5 billion capital injection into Goldman Sachs a little over a year ago had a "huge" and instantaneous impact on client and investor confidence in the storied Wall Street firm, Goldman CEO Lloyd Blankfein told The Wall Street Journal.
It's working out pretty nicely for Buffett and fellow Berkshire Hathaway shareholders as well.
Blankfein was the subject of the WSJ's "Weekend Interview" on Saturday. Among many other subjects, the CEO of the "bank everyone loves to hate" addressed Buffett's investment in Goldman last September.
"Warren Buffett put his money where his mouth is and said, 'I'll bet $5 billion that Goldman Sachs is fine,'" Blankfein told the WSJ.
He appears to have been right. As I write, Goldman shares are trading around $190, near their 52-week high. A year ago the firm was in the news because some feared it could collapse under the weight of the other failing Wall Street institutions. Now the story du jour is a possible public relations hit that Goldman may take by paying out massive bonuses to employees who have earned billions for the firm this year.
Buffett himself received a nice bonus for Berkshire shareholders as part of the $5 billion investment in Goldman preferred shares last September. In addition to a 10 percent annual dividend, Berkshire got 43.5 million warrants to buy Goldman common stock at $115 a share.
Those warrants now have a paper profit of $3.3 billion. If Goldman shares hit $230 a share, Buffett will have earned back a paper profit on the warrants that equals his total investment in the firm, and that doesn't even include the $500 million annual dividend. Buffett has said he'll likely hold onto the warrants for a while rather than cashing them in.
So far Buffett's $3 billion investment in General Electric for Berkshire last fall isn't working out as well. The GE investment carried about the same terms as the Goldman deal. Berkshire got warrants to buy $3 billion worth of GE common stock at a $22.25 strike price.
GE is trading at about $16.40 a share as I write, meaning Buffett is still well under water on the GE warrants. But GE has been rallying of late. Prem Watsa, Mark Hillman and Charles Brandes all placed bets on the conglomerate in the quarter ending June 30, Guru Focus data show.
Disclosure: Long BRKB and GE
It's working out pretty nicely for Buffett and fellow Berkshire Hathaway shareholders as well.
Blankfein was the subject of the WSJ's "Weekend Interview" on Saturday. Among many other subjects, the CEO of the "bank everyone loves to hate" addressed Buffett's investment in Goldman last September.
"Warren Buffett put his money where his mouth is and said, 'I'll bet $5 billion that Goldman Sachs is fine,'" Blankfein told the WSJ.
He appears to have been right. As I write, Goldman shares are trading around $190, near their 52-week high. A year ago the firm was in the news because some feared it could collapse under the weight of the other failing Wall Street institutions. Now the story du jour is a possible public relations hit that Goldman may take by paying out massive bonuses to employees who have earned billions for the firm this year.
Buffett himself received a nice bonus for Berkshire shareholders as part of the $5 billion investment in Goldman preferred shares last September. In addition to a 10 percent annual dividend, Berkshire got 43.5 million warrants to buy Goldman common stock at $115 a share.
Those warrants now have a paper profit of $3.3 billion. If Goldman shares hit $230 a share, Buffett will have earned back a paper profit on the warrants that equals his total investment in the firm, and that doesn't even include the $500 million annual dividend. Buffett has said he'll likely hold onto the warrants for a while rather than cashing them in.
So far Buffett's $3 billion investment in General Electric for Berkshire last fall isn't working out as well. The GE investment carried about the same terms as the Goldman deal. Berkshire got warrants to buy $3 billion worth of GE common stock at a $22.25 strike price.
GE is trading at about $16.40 a share as I write, meaning Buffett is still well under water on the GE warrants. But GE has been rallying of late. Prem Watsa, Mark Hillman and Charles Brandes all placed bets on the conglomerate in the quarter ending June 30, Guru Focus data show.
Disclosure: Long BRKB and GE
