Financial Information
Can Buffet lose money in GE?
Can Buffet lose money in GE?
Warren Buffett invests $ 3 billion. in GE. He gets 10% of the dividends on preferred stock is redeemable in GE’s premium of 10%. I was wondering if it’s a scenario (with the exception of bankruptcy GE), that Buffet could be losing money? Divident is guaranteed, even though GE’s office calls, he will be 3300000000 $ atleast. So why not fund the GE with other, less expensive means? So where is the risk of Warren?
reply ornithologist Muncie
Talk about a bargain. Sound is a good deal. I wish I could obtain such an agreement. Dividend of 10% plus warrants to GE. Wow. Here is how he could lose. Assuming interest rates of 16%, as it was in 1980-1983. He would see his value decline in investment, but only when he landed a change of heart, he would actually lose money. Maybe GE is really scared and need money really bad.
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#3 written by Murcielago 11 months ago
It would not be possible for GE to get 3b right away without incurring more expenses or having someone else dictate who’s in the Board of Directors, specially with credit drying up so quickly
The dividend needs to be declared in order to be paid, unless the preferred stock has special provisions.
GE will not call the stock unless it’s to their advantage which will happen only if GE stock drops significantly, but by then Mr. Buffet would have probably sold his stock or made some other arrangements.
The risk for Mr. Buffet is that there will be no dividend declared, price will plummet enough to make his investment worthless but without bankrupting GE, and he won’t be able to sell in time.
But considering that Mr. Buffet has more money than any one of us will see in several lifetimes, I’m sure he thought about this scenario.
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#4 written by beancounter 11 months ago
If he wanted to sell his shares he might find the market price depressed. (There might be restrictions on him selling – I’m not sure.) But Berkshire has so much cash there’s no need for him to sell the shares. So he will make $ . Only risk for Warren is a GE bankruptcy which would be highly unlikely.
I guess GE wanted to move quickly. I saw an interview with Buffett today. He was called in the morning and the deal was done by the end of the day. GE’s also raising capital through a secondary stock offering but that could take months.
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I can’t see it happening. GE is a huge conglomurate company with many many products. Are you going to stop using lightbulbs all together? What about alarm clocks or TVs?
GE is just like a company like Johnson and Johnson or 3M. They are big time in cyclical items (stuff people by on a regular basis over and over again) and unless not just hte economy crashes, but civalization as a whole colapses and we start living in mud huts wearing potatoe sacks and never bathing, these companies will likely always make money (might not be a ton, but they aren’t going bankrupt anytime soon).