Warren Buffett doesn’t need a Powerball jackpot — not when he’s winning the Goldman Sachs lottery.
The Oracle of Omaha, whose $5 billion investment in Goldman at the peak of the financial meltdown in 2008 has already netted him a 40 percent profit, yesterday announced that he was milking even more out of the bank — without the savvy billionaire having to pony up a cent.
Under the old deal, Buffett would have had to come up with $5 billion to exercise 43.5 million warrants received in 2008 with a strike price of $115. But the stock buy would have been costly to Buffett and highly dilutive to Goldman shares.
So the two struck a deal where Goldman will give Buffett, in exchange for the warrants, about 9 million shares. That’s about 20 percent of the present value of the warrants Buffett is due — the same rough percentage difference between the strike price and Goldman’s current stock price.
The deal is set to be completed on Oct. 1 and will make Buffett one of Goldman’s largest shareholders.
“The transaction saves Berkshire Hathaway from coming up with the cash to pay the strike price,” said Linus Wilson, assistant professor of finance at the University of Louisiana at Lafayette.
The deal also saves Goldman from flooding the market with more shares.
Ultimately, Buffett’s the big winner. He’s netted roughly $7 billion on his original $5 billion investment in Goldman, excluding the warrants, Wilson’s data show.