Going to the Oracle: Goldman Sachs, September 2008
Posted: 10 Jun 2009
Date Written: May 27, 2009
Abstract
On September 23, 2008, in the midst of a historic crisis in the U.S. financial markets, Warren Buffet's Berkshire Hathaway invested $5 billion in Goldman Sachs. Goldman CEO Lloyd Blankfein said: 'We are pleased that given our longstanding relationship, Warren Buffett, arguably the world's most admired and successful investor, has decided to make such a significant investment in Goldman Sachs.' He added that the deal 'will further bolster our strong capitalization and liquidity position,' calling Buffett's decision 'a strong validation of our client franchise and future prospects.' For his part, Buffett called Goldman 'an exceptional institution' with '...an unrivaled global franchise, a proven and deep management team, and the intellectual and financial capital to continue its track record of outperformance.' This case provides an opportunity to evaluate Goldman's decision to raise capital, the cost of the firm of Buffett's investment and the decision by Warren Buffett to make the investment, all in the context of a profound market crisis that may have altered the usual metrics for such decisions.
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