Expression of confidence

Over the past two weeks, financial markets suffer and are not really stable. Since the bankruptcy of Lehman Brothers and the repurchase of Merrill Lynch by Bank of America, the shares of Goldman Sachs fall.

Buy Tuesday 24th of September, the most talented stock-pickers and also one of the richest men of the world, Warren Buffet, has decided to invest $ 5 billion of perpetual preferred stock in Goldman Sachs. This investment carries 10 percent dividend.

This announcement intervenes two days after the decision of the Fed to convert two of the most important investment bank (Goldman Sachs and Morgan Stanley) to a bank holding company, which is the most common structure of many commercial banks.

Warren Buffet through Berkshire Hathaway Inc, which has total assets of nearly $278 billion, including significant stakes in well known companies like America Express, Wells Fargo & Co…, will receive warrants. These warrants allow to Buffet to buy $5 billion in common stock at $115 per share any time over the next five years.

Shares of Goldman Sachs rose 8.5% following the announcement. In regular trading, the shares rose by 3.5 percent. On the other hand, Goldman Sachs plans to sell $2.5 billion of common stock to improve his balance sheet.

Also, a Japanese bank Sumitomo Mitsui Financial plans to plough several hundred billion yen into Goldman Sachs.

This announcement is one of the biggest expressions of confidence in the financial system since the credit crisis.