8-KOther EventsExhibits & Filings

GOLDMAN SACHS GROUP INC 8-K Report, Corporate Update (Mar 26, 2013)

Filed March 26, 2013For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. (GS) announced an amendment to a warrant originally issued to Berkshire Hathaway Inc. in October 2008. This amendment, dated March 25, 2013, modifies the terms under which Berkshire Hathaway can exercise its warrant to purchase 43,478,260 shares of GS common stock at an exercise price of $115 per share. The key change is that the warrant can now only be exercised on October 1, 2013, and will be net share settled. This means instead of a cash payment, Goldman Sachs will issue a number of shares to Berkshire Hathaway based on the difference between the stock's average closing price for the 10 trading days preceding the exercise date and the $115 exercise price. This move is significant as it alters the potential dilution and exercise mechanics for a substantial block of GS shares, impacting future capital structure and shareholder equity.

Key Highlights

  • 1Amendment to Warrant with Berkshire Hathaway Inc. executed on March 25, 2013.
  • 2Original warrant was for 43,478,260 shares of GS common stock at $115 per share, issued October 1, 2008.
  • 3Warrant exercise is now restricted to a single date: October 1, 2013.
  • 4The exercise mechanism has changed to 'net share settlement'.
  • 5Under net share settlement, GS will issue shares instead of receiving cash based on the stock price exceeding $115.
  • 6The number of shares issued will be determined by the average closing price over the 10 trading days before October 1, 2013, less the $115 exercise price.
  • 7This filing includes the Form of Amendment to the Warrant as Exhibit 4.1.

Frequently Asked Questions

The primary impact is a change in how the warrant held by Berkshire Hathaway will be settled. Instead of Berkshire Hathaway potentially paying cash to exercise the warrant, Goldman Sachs will now issue shares to them, depending on the stock price performance leading up to October 1, 2013. This affects the number of outstanding shares and potential future dilution.

Following the amendment, the warrant can only be exercised on a specific date: October 1, 2013.

Net share settlement means that instead of Berkshire Hathaway paying the exercise price in cash to receive shares, Goldman Sachs will calculate the value of the warrant (based on the stock price exceeding $115) and simply deliver shares to Berkshire Hathaway. The number of shares delivered will be equivalent to the 'in-the-money' value of the warrant, adjusted for the exercise price, without requiring a cash transaction from Berkshire Hathaway.

The potential for dilution exists, as Goldman Sachs will issue shares if the stock price is above $115 on the specified exercise date. The exact number of shares issued will depend on the average closing stock price in the 10 trading days preceding October 1, 2013. If the stock price is significantly above $115, a substantial number of new shares could be issued, increasing the total number of outstanding shares and thus diluting existing shareholders' ownership percentage.