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Buffett’s Latest Big Deal: 10 Million Shares of Goldman at No Cost

Bernice Napach
Daily Ticker

Warren Buffett has once again made an ingenious financial deal, one that not only benefits him and other Berkshire Hathaway (BRK-B) shareholders but also the counterparty involved.

He plans to exchange warrants for 43.5 million Goldman Sachs (GS) shares that he received in a 2008 deal made during the financial crisis for 10 million shares of Goldman at no cost. That’s worth $1.47 billion at Goldman’s current price and it’s in addition to the 10% dividend Buffett’s been collecting all along on the original stake.

Goldman, in turn, won’t suffer nearly as much dilution of its stock. It will only have to issue about 2% new shares versus 9% if Buffett had executed the original warrants. Goldman will also have fewer shares outstanding when negotiating with the Federal Reserve for permission to buy back stock.

Related: Buffett Scolds CEOs For Not Deploying Stockpiles of Cash

“The guy cuts good deals,” says Matt Nesto of Yahoo! Finance’s Breakout, about Buffett’s latest move. And this deal, says Nesto, “is almost like Match.com. They’re perfect for each other…the hard-driving dealmaker from Omaha and the sharpest, shrewdest investment bank on the planet Earth.”

The Goldman deal is Buffett’s latest one in the financial sector.

Buffett “is knee deep…in financials,” says The Daily Ticker’s Aaron Task. In addition to Goldman, Buffett has “has a big stake in Wells Fargo (WFC)…in U.S. Bancorp (USB)…in, American Express (AXP) and he did a similar deal in 2008 with Bank of America (BAC),” says Task.

“When Warren Buffett comes out and says the U.S. banks are in better shape than they have been in a long time he’s talking his book,” says Task.

Related: Suddenly, Things Are Going "terribly Wrong" for the Big Banks

But the banking industry is not without risks. The Wall Street Journal reports today that banks globally face more than $100 billion in legal liabilities tied to the financial crisis, and Libor rate-rigging scandal.

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