Tuesday, Dec. 08, 2009

Berkshire Hathaway–Goldman Sachs

On Sept. 24, 2008, with financial panic swirling around him, Warren Buffett cut a deal with investment bank Goldman Sachs. (This is the first of several entries on this list involving deals made in previous years that paid off in 2009.) Buffett's Berkshire Hathaway handed over $5 billion — and with it his de facto seal of approval — in exchange for preferred shares that paid a 10% dividend, plus warrants to buy 43.5 million shares of common stock for $115 apiece. A year later, those warrants could have been redeemed for a $3 billion profit. Buffett has thus far opted to hold on to them, betting that Goldman's stock price will go higher before the warrants expire in 2013. A similar Berkshire deal with General Electric wasn't quite such a slam dunk, but it was still a moneymaker. By buying when everyone else was selling — and by negotiating a far better deal than the Treasury Department did with its bank investments a few weeks later — the Oracle of Omaha scored big again.