Surprise! Taxpayers Didn't Get Screwed On The Goldman Warrants

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Econ professor Linus Wilson has been banging the drum forever about the potential ripoff of taxpayers in the sale of TARP warrants. 

So we fully expected to hear from him how the Goldman Sachs repurchase of its TARP warrants for $1.1 billion represented some massive screwing over of the taxpayers.

Nope!

Turns out we (as in you and me) did OK, and we eagerly await our check from the Treasury.

Says Wilson:

The Goldman Sachs TARP warrant deal is the best deal that that taxpayers have got to date.  In April 2009 on Clusterstock, Lucas Van Praag from Goldman Sachs said that taxpayers deserve a fair return for their investments.  They lived up to their word today.

The price paid is very close to my middle estimate.

TARP Warrants

Low

Middle

High

Goldman Sachs (GS)

$947

$1,120

$1,349

% of model value

116%

98%

82%

This is based on 7/21/2009 closing prices.  I used the option pricing models of Black-Scholes and Merton with adjustments for dilution.  This valuation assumes a zero per cent chance of a qualified equity issuance, which would cancel half the TARP warrants.

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