Goldman Sachs is about to join a rarefied club: the group of banks which count Warren E. Buffett as a big investor.
The firm said on Tuesday that it has changed the terms of warrants issued to Mr. Buffett’s Berkshire Hathaway during the financial crisis, essentially making the billionaire one of the firm’s biggest investors without having to pay additional money.
The warrants previously gave Berkshire the right to buy $5 billion worth of common shares, at an exercise price of $115, at any time before Oct. 1. Now, Mr. Buffett will receive an amount of stock equal to the difference between the stock price and the $115 strike price in cash, multiplied by 43.5 million.
At Monday’s closing price of $146.11, that would mean Mr. Buffett would receive about 9.2 million shares. That would make Berkshire the ninth-biggest shareholder in Goldman, according to data from Bloomberg.
Mr. Buffett is well-known for his caution around big banks, keeping big holdings of common stock only in Wells Fargo and US Bancorp. Preferred shares that he received from Goldman and Bank of America carried a big dividend, making them extremely expensive for the issuers.
But Mr. Buffett has long praised Goldman and its management team, even when the firm faced a lawsuit by the Securities and Exchange Commission over a mortgage investment that the bank put together.
“We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago,†Mr. Buffett said in a statement on Tuesday. “I have been privileged to have known and admired Goldman’s executive leadership team since my first meeting with Sidney Weinberg in 1940.â€
For his part, Goldman’s chief executive, Lloyd C. Blankfein, said the firm was “pleased that Berkshire Hathaway intends to remain a long-term investor in Goldman Sachs.â€
Goldman gave Mr. Buffett the warrants and $5 billion in preferred stock, in the fall of 2008, in part to restore confidence in the health of the firm. In return for the pricey investment, the bank received a seal of approval from one of the most famous investors in the world.
The firm has since repurchased the preferred shares from Mr. Buffett. The warrants have been in the money for nearly the entire life of Berkshire’s investment.
