Bank of America deal: Berkshire bought $5 billion of preferred stock that paid a 6% annual dividend, and received warrants for 700 million shares that it could exercise over the next 10 years. BoA has the option to buy back the preferred shares at any time for a 5% premium.
Goldman Sachs deal: Berkshire bought $5 billion of preferred stocks that paid a 10% dividend, and received warrants to purchase $5 billion of common stock with a strike price of $115 per share. Berkshire was given 5 years to exercise the warrants.
American Express scandal: Based on his inference that the Amex brand was still strong along with the underlying business, and the scandal was just a one-time hit against earnings, he began picking up Amex shares which had dropped from $60 to $35 over 60 days.
- He was impressed by Amex's instant response to the losses, taking the hit and indemnifying many of the third-party victims.
- He also saw that Amex’s competitive advantage and cash-flow generating capabilities were intact and believed that fears over the eventual liability were overblown.
- Most importantly, he recognised that this scandal had nothing to do with Amex's core businesses - credit cards and travellers cheques, in which the company was a distinct market leader with excellent brand recognition. Before arriving at this conclusion, he spent an evening with the cashier at Ross's Steak House in Omaha. He noted that the scandal did not stop people from using their green cards. Amex's intangible qualities (trust and reliability) were intact.
