News just broke that Warren Buffett will purchase $3 billion of perpetual preferred stock with a 10% yield from General Electric (GE). As part of the deal, he will also receive warrants to buy $3 billion in GE common stock at an excercise price of $22.25 at any time over the next 5 years (GE Press Release).
This follows on his investment last Tuesday in $5 billion of Goldman Sachs (GS) perpetual preferred stock, also with a 10% yield and warrants to buy $5 billion in Goldman common stock at a strike price of $115 at any time over the next 5 years (GS Press Release).
He also made a $4.7 billion bid for Constellation Energy (CEG) a couple weeks ago (Press Release).
Now, obviously Buffett is getting some very sweet deals (10% yield!) because of who he is. But I don’t think he’d be putting this money to work if he didn’t see some real value in these companies. He’s getting an opportunity to invest in top notch companies at discounted prices.
This is a sign that there is starting to be value in the financial markets.
Disclosure: Top Gun has no position in General Electric (GE), Goldman Sachs (GS) or Constellation Energy (CEG) shares.