The „Buffett Convert” Could Be A Big Benefit To Yahoo And Viacom
In the darkest hours of the financial crisis in September 2008, Goldman Sachs took a $5 billion investment from Warren Buffett. Goldman had an incredibly valuable management team. You couldn’t have had better leaders running the company than they had then in Lloyd Blankfein and Gary Cohn. And they didn’t need Buffett’s money. However, at that time, the baby was being thrown out with the bathwater for all financials. Noah’s Ark didn’t see that much rain. Goldman needed the confidence Buffett’s investment would breed in their counterparties. The result of the investment was that it stopped the run on Goldman cold.
As part of the deal, Buffett also got warrants to buy $5 billion of Goldman stock down the road at $115/share. Later, when he exercised those warrants, he and Berkshire Hathaway BRK.B +% investors got a $2 billion profit. We, at SpringOwl, refer to this deal as the “Buffett Convert.”
The “Buffett Convert” was a good deal for everyone involved at that time: Berkshire shareholders and Goldman shareholders. The hounds were at Goldman’s door in 2008. Without that Buffett vote of confidence, Goldman might not have seen 2009. The whole financial system might have fallen in on itself. It was a win-win deal for all sides.
NEW YORK, NY – JANUARY 12: President and CEO of Viacom Philippe Dauman (L) and Sutton Foster attend the ‘Younger’ Season 2 and ‘Teachers’ Series Premiere at The NoMad Hotel on January 12, 2016 in New York City. (Photo by Dimitrios Kambouris/Getty Images)
Buffett didn’t just bring symbolic confidence to Goldman during this time. He brought his knowledge, experience, and unparalleled rolodex of contacts. He, Blankfein and Cohn were all in the same boat now. If Goldman went down, they all shared in the pain. It was all hands on deck to make it work. And they did.
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The “Buffett Convert” is a solution that could be optimal for two of SpringOwl’s holdings: Yahoo YHOO +0.00% and Viacom VIAB +0.00%. Over the last 6 weeks, SpringOwl has released two separate 99 page presentations outlining our reasons for owning Yahoo and Viacom. Both companies are troubled for different reasons than Goldman was in 2008. Both Yahoo and Viacom have poor management teams. Both trade for substantially lower valuations than we believe they should. Yet, we believe both have a unique set of assets which could be worth substantially more if they were properly managed.
Although some shareholders of both Yahoo and Viacom think that a simple sale or break-up of both companies is the best way to create value for shareholders, we believe that both companies could benefit from their own version of the “Buffett Convert.”
Forrás: http://www.forbes.com
