Just a week after disclosing plans to make a big investment in Goldman Sachs ( GS), Warren Buffett is placing another bet on a depressed stock, this time General Electric ( GE). GE said Wednesday that it has reached an agreement to sell $3 billion of perpetual preferred stock in a private offering to Buffett's Berkshire Hathaway ( BRK-A). At the same time, GE plans to offer at least $12 billion of common stock to the public.
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The preferred stock being sold to Berkshire has a dividend of 10% and is callable after three years at a 10% premium. In connection with the offering, Berkshire will receive warrants to purchase $3 billion of common stock with a strike price of $22.25 a share, exercisable at any time for five years. As for the public offering, GE said the underwriters will have a 30-day option to buy additional stock to cover any overallotments. The company believes the offering will be priced before the U.S. market opens Thursday. Goldman is the bookrunner for the transaction. GE expects that Banc of America Securities, Citigroup, Deutsche Bank Securities, J.P. Morgan and Morgan Stanley will be added as additional managers for the offering. Shares of GE were down more than 7% before being halted ahead of the news. After the stock began trading, most of those losses were erased.