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Berkshire's warrants to earn USD2 billion worth of Goldman Sachs stock

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September 30
6:46 AM 2013

Berkshire Hathaway Inc stands to receive over USD2 billion worth of Goldman Sachs Group stock through warrants which the Warren Buffett-led investment firm had acquured during the height of the 2008 financial crisis. 

As it stands, Berkshire would receive nearly 13.2 million shares from the New York based bank, according to the agreement signed in 2008. The agreement pegs the stake of Berkshire at the average closing price on ten trading days until September 30. The number of shares is based on stock prices through September 27 while the actual amount may vary based on today's stock price. Last week, the bank's share values closed at USD159.85 per share.

When shares plunged because of the crisis, Goldman Sachs turned to Berkshire to provide capital and buttress market confidence at the time of the collapse of Lehman Brothers Holdings Inc. Buffett himself, Berkshire's CEO and Chairman, invested USD5 billion for preferred holdings and in exchange got warrants to purchase USD5 billion of stock priced at USD115 per share.

Back in 2011, Goldman Sachs redeemed the preferred stake at a 10% premium. Buffett in March 2013 agreed to a cashless exercise of the warrants and would be receiving its equivalent in shares as paper profit.

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