NEW YORK — Goldman Sachs Group Inc., seeking to improve not only its balance sheet but its standing with investors, has undertaken a huge capital-raising program that includes an investment of at least $5 billion from Warren Buffett and a common stock offering for another $5 billion.
Just a week earlier, Goldman looked to be on precarious ground as its stock price plunged in response to fears that it could not survive as an independent investment bank. But the company contended Wednesday that the current crisis in the financial markets, which sent Lehman Brothers Holdings Inc. into bankruptcy court and Merrill Lynch & Co. into a sale to Bank of America Corp., wasn't the catalyst for the deals.
"Although we felt we were under no pressure to raise capital, we've always said if an opportunity arose, we would look at it," Goldman spokesman Lucas van Praag said. Raising capital "gives us greater firepower and greater flexibility," he said.
Goldman said Wednesday that it was raising $5 billion through a common stock offering, doubling the amount it announced just the night before. Goldman priced 40.65 million common shares at $123 apiece. An additional 6.1 million shares may be sold to cover over-allotments, potentially boosting proceeds by $750.3 million.
Buffett, considered among the top investors in the world, will buy through his Berkshire Hathaway Inc. $5 billion in preferred Goldman stock and receive an option to purchase an additional $5 billion in common stock.
Buffett said during an interview on CNBC "there's no better firm on Wall Street." Buffett said other investment banks, including Lehman, had approached him in recent months, but he passed on those investment opportunities. He declined to discuss the deal beyond the comments made on CNBC.
The investment by Buffett — which Goldman called an anchor for its common stock offering — probably will provide reassurances to a nervous market, said Brad Hintz, an analyst with Sanford C. Bernstein and a former chief financial officer at Lehman.
Buffett's investment will be his second major foray into Wall Street. In the late 1980s, Berkshire Hathaway invested in Salomon Brothers Inc. When the investment firm admitted wrongdoing in bidding for U.S. Treasury bonds in 1991, Buffett became interim chairman and helped Salomon reach a settlement with the government before stepping down in 1992. Salomon was later sold to what is now Citigroup Inc.
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