Warren Buffett’s $5 billion investment in Goldman Sachs (GS) could change everything.

Yes, Warren got a sweetheart deal–a preferred stock yielding 10% and a warrant to buy $5 billion of common stock at $115 (8% below the close). But the fact that he had the confidence to pull the trigger on a $5 billion investment in a company whose very existence seemed threatened last week could turn the whole market around (temporarily).

  • Goldman’s up 8% in the aftermarket, to $135. This despite the impending incremental dilution from a $2.5 billion common equity offering.
  • Morgan Stanley’s up 10%, to $30
  • Bank of America’s up 4% to $35
  • etc.

Warren’s investment also shows that, at least for some financial firms, the private markets are still open. This could induce other banks to seek private capital and other investors to follow in Warren’s footsteps.

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