NEW YORK (AP) — Berkshire Hathaway Inc. has exercised warrants that will soon make it one of Goldman Sachs’ top 10 shareholders.
The firm, led by billionaire Warren Buffett, gave Goldman a $5 billion lifeline during the financial crisis in exchange for payments at 10 percent interest and stock warrants from Goldman.
Stock warrants generally give the holder the right to purchase shares at a specific price within a certain time frame.
When the deal was first struck, Berkshire had warrants to buy 43.5 million common Goldman shares at a price of $115 per share at any time before October 1. Under that arrangement, Berkshire would have had to make a large upfront cash payment for the shares.
Instead, both sides renegotiated the agreement in March. Under the revised deal, Berkshire will receive shares equal in value to what would have been its paper profit in the original deal. The formula used the difference between the average closing price of Goldman’s stock over the 10 days prior to Tuesday and the exercise price of $115, multiplied by 43.5 million. Goldman’s stock closed Tuesday at $159.
This allowed Berkshire to get the 13.1 million shares, which were worth about $2.08 billion at Tuesday’s closing price.
Goldman Sachs said Tuesday that it will deliver the shares to Berkshire Hathaway on Friday. The company currently has an estimated 449.1 million shares outstanding, according to FactSet.
Berkshire Hathaway shares ended Tuesday up 63 cents at $114.14.