AI Overview
In September 2008, at the height of the financial crisis, Warren Buffett’s Berkshire Hathaway invested $5 billion in Goldman Sachs through the purchase of perpetual preferred stock, not standard convertible bonds.
This strategic investment provided Berkshire with a 10% annual dividend (paying $500 million per year) and included warrants to purchase an additional $5 billion of Goldman common stock at $115 per share.
Key Details of the 2008 Investment:
- Structure: $5 billion in perpetual preferred shares plus warrants.
- Terms: A guaranteed 10% annual dividend, which Buffett famously noted was paying him "$15 a second".
- Confidence Boost: The investment was viewed as a major vote of confidence in Goldman Sachs during a period of extreme market turmoil, helping the bank maintain stability.
- Outcome: Goldman Sachs redeemed the preferred shares in 2011, paying a 10% premium ($500 million) to break the agreement early, resulting in a profit of over $3 billion for Berkshire Hathaway when combined with dividends and warrant exercises.
In 2013, the warrants were converted into a large equity stake in the bank.
