Alphabet announced an $80 billion equity offering, and as part of that plan Berkshire Hathaway will privately purchase $10 billion of shares. Alphabet said the proceeds will be used primarily to expand its costly artificial-intelligence (AI) infrastructure, where demand already outstrips available capacity.
Details of Berkshire Hathaway's purchase
Berkshire Hathaway will acquire shares in two tranches: $5 billion of Class A common shares at $351.81 per share and $5 billion of Class C shares at $348.20 per share. Both purchase prices are below Monday’s closing prices. The transaction increases Berkshire’s existing position in Alphabet; the company’s stake now amounts to a $16.6 billion package, making it one of Berkshire Hathaway’s largest equity investments.
Berkshire had previously indicated it has been building its position in Alphabet since the third quarter of last year and said last month that it had more than tripled its holding.
The broader fundraising plan
Alphabet also plans to raise an additional $30 billion through public offerings arranged with investment banks. That $30 billion is expected to be split roughly half in depositary shares representing mandatory convertible preferred stock and half in Class A and Class C common shares.
In addition, the company intends to launch a $40 billion continuous share sale program in the third quarter, which would allow it to sell shares gradually at prevailing market prices.
Why the capital is needed
In April, Alphabet increased its annual capital expenditure plan by $5 billion, bringing the range to $180–190 billion. The company said the increase was necessary to keep pace with rising demand for AI-driven computing capacity. Alphabet noted that both corporate and consumer demand for its AI solutions already far exceed available capacity.
Debt load and market reaction
Over the past year Alphabet has also raised more than $85 billion of external financing across six currencies. As a result, the company’s total debt load has topped $100 billion. Following the fresh capital-raising announcement, Alphabet shares fell about 2% in after-hours trading.
The report was published by Reuters. This article does not constitute investment advice or a recommendation.
