Since when did GOLDMAN SACHS turn into a startup? Buffet gets better terms than VCs
Posted by Jeff Tue, 23 Sep 2008 22:50:00 GMT
Goldman Sachs just announced that it is going to raise money from my favorite investor - Warren Buffett. I was surprised to see that the terms actually reflect the risk usually reserved for highly risky startups extended to the most respectable investment bank in the world.
Forbes reports that Buffett will receive preferred shares that will yield 10% (think of this as debt), but also the ability to purchase common stock at $115, which are essentially in-the-money options.
Now, I’m a startup guy and I know that startup funding is usually something to the tune of preferred shares with an interest provision and the ability to convert to common. (Convertible Peferreds). This deal sounds terribly familiar.
Even if GS goes out of business, the scenario is the same as convertible preferreds - so Buffett gets first dibs in the shareholder pool on assets. In the case that goldman goes below $115, buffett is still collecting dividends (startups don’t pay dividends). In the case that Goldman shares gain in value, Buffett’s preferred shares increase in value AND he gets to exercise his options.
Anyway I look at this - looks like a great deal for Buffett.