Bank of America Corp.'s stock shot up Thursday on news that Warren Buffet's Berkshire Hathaway is investing $5 billion in the company.
Bank of America announced early Thursday that Berkshire Hathaway has agreed to buy 700 million shares of B of A stock at $7.14 per share. As part of the transaction, Berkshire Hathaway will also purchase 50,000 shares of B of A preferred stock that pays an annual dividend 6%.
In a news release, Buffett said that he recently called B of A Chief Executive Brian Moynihan and said he wanted to invest because he believes it "is a strong, well-led company.
"I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them," Buffett said in a news release.
B of A's shares have lost more than half their value in recent months on concerns that the company would need to raise additional capital to deal with losses on souring loans.
The shares closed at $7.65 Thursday, up 9.4% from Wednesday's closing price.
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