By Andrew Bary
There are benefits to being Berkshire Hathaway and being able to write a big check fast.
That was obvious in Alphabet's $80 billion equity offering announced after Monday's market close.
As part of the deal, Alphabet will issue $10 billion of common stock to Berkshire in a private placement at a 6%-plus discount to Alphabet's closing price on Monday.
Berkshire will purchase $5 billion of Alphabet's class A voting stock at about $352 a share and $5 billion of the nonvoting C shares at roughly $348 a share.
So why did Berkshire get a sweet deal?
For starters, almost every equity offering is priced at a discount to the most recent market price to entice investors and offset the risk that the stock will drop on news of the deal.
Alphabet also might have wanted Berkshire's involvement as an inducement for other investors to participate because of Berkshire's outstanding reputation.
In fact, Alphabet stock was lower on Tuesday because of the surprise equity raise. The company hadn't even mentioned the possibility on its April earnings call. Investors had the impression that Alphabet would keep funding its huge capital expenditures -- slated to total $180 billion to $190 billion this year -- from earnings and new debt.
In midday trading, Alphabet's C shares $(GOOG)$ were down 1.9% to $365.35 and the A shares $(GOOGL)$ were off 2% to $368.93.
Against that backdrop, the Berkshire terms look good but not quite as good as they appear on their face.
After the new purchase, Berkshire will now own about $31 billion of Alphabet stock, consisting of $21 billion of shares purchased since 2025's third quarter -- some 58 million shares -- and about 28 million shares of newly issued stock from Alphabet.
The Alphabet holding is roughly tied with Coca-Cola for third in size in the Berkshire portfolio. Apple and American Express hold the top two spots. The Apple stake is valued at more than $60 billion and the American Express interest at about $47 billion.
On X, there's a debate about whether Berkshire's CEO, Greg Abel, made a shrewd move in buying the Alphabet stock. Some think it is smart to invest some of Berkshire's $380 billion of cash -- and the buy comes just after the company's $8.5 billion deal for home builder Taylor Morrison over the weekend. The deal also gives Berkshire more technology exposure.
"Between the Taylor Morrison acquisition and the Alphabet deal, I really like the direction they're going," said Five Points Capital on X. "I wouldn't be surprised to see Berkshire participating in more deals like the Alphabet one. The massive cash pile could prove advantageous at a time when the largest, most profitable companies in the world need to raise money."
The doubters point out that Berkshire is buying Alphabet stock after it has doubled in the past year -- a move not keeping with Chairman Warren Buffett's usual value approach to investing.
Alphabet now is valued at about 25 times projected 2026 earnings per share -- higher than the multiple of about 15 that Berkshire normally likes to pay for stocks.
"It was the top when Berkshire funded Google capex via equity," wrote one Berkshire follower on X.
Write to Andrew Bary at andrew.bary@barrons.com
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(END) Dow Jones Newswires
June 02, 2026 12:15 ET (16:15 GMT)
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