Goldman Sachs raises $5b with public stock offering
NEW YORK - Goldman Sachs Group Inc., seeking to improve not only its balance sheet but its standing with investors, has undertaken a huge capital-raising program that includes an investment of at least $5 billion from Warren Buffett and a common stock offering for another $5 billion.
Just a week ago, Goldman looked to be on precarious ground as its stock price plunged in response to fears it could not survive as an independent investment bank. But the company contended yesterday that the current crisis in the financial markets, which sent Lehman Brothers into bankruptcy court and Merrill Lynch into a sale to Bank of America, wasn't the catalyst for the deals.
"Although we felt we were under no pressure to raise capital, we've always said if an opportunity arose, we would look at it," Goldman spokesman Lucas van Praag said. Raising capital "gives us greater firepower and greater flexibility," he said.
Goldman said yesterday it was raising $5 billion through a common stock offering, doubling the amount it mentioned just the night before. Goldman priced 40.65 million shares at $123 apiece. An additional 6.1 million shares may be sold to cover overallotments, potentially boosting proceeds by $750.3 million.
Buffett, considered among the top investors in the world, through his Berkshire Hathaway Inc. will buy $5 billion in preferred Goldman stock and receive an option to purchase $5 billion more in common stock.
Buffett said on CNBC "there's no better firm on Wall Street." He acknowledged other investment banks, including Lehman, had approached him in recent months, but he passed on those investment opportunities. He declined to discuss the deal beyond his comments made on CNBC. 