Goldman Sachs Group Inc. won the backing of Warren Buffett, the world's preeminent stock-picker, as the Wall Street firm seeks to raise cash from investors whose faith in the investment-banking business model has been shaken.
The bank soared 11 percent to $138.17 in German trading today. For Goldman, the endorsement came at a price. Berkshire Hathaway Inc., led by the 78-year-old billionaire, is buying $5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years. The common stock closed yesterday at $125.05, providing Buffett with an instant paper profit of $437 million.
In addition to raising money from Buffett, Goldman said it plans to sell at least $2.5 billion of common stock to the public. It will be the firm's first common stock offering since 2000. No details of the planned offering were disclosed in a statement released by the New York-based company yesterday.
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I hope Goldman make it through the credit cycle,they are doing the right thing.
ReplyDeleteThe decision to seek a cash infusion marks a reversal for Goldman, which this week transformed itself from the biggest U.S. securities firm to the nation's fourth-largest bank holding company.
Buffett's investment will further bolster Goldman strong capitalization and liquidity position