As per the official reports, Twitter is going to tap the debt markets for the very first time, planning to increase as much as $1.5 million by investing in acquisitions and expansion.
According to a regulatory filing on Thursday, one of the San Francisco-based micro blogging companies is planning to sell the exchangeable bonds in two $650 million pieces, one maturing in 5-years and one in the coming 7-years. There is a possibility that the offering size might raise to $1.5 billion if the banks concerned exercise an overallotment decision.
Twitter, which isn’t likely to be beneficial this year, is now going to invest in order to upsurge its advertising business and put in engineers who can assist tweak its product to attract a wider spectators. According to a person familiar with the matter told that the higher management sees a prospect in the debt market to lift up more cash economically with small instant intensity of their shareholders’ ownership. The person also said that the company was enthused by technology leaders, including Google Inc. and Netflix Inc., lucratively offer debt even as borrowing remains economical.
The decision has been taken after Anthony Noto, an ex- Goldman Sachs Group Inc. banker who helped with Twitter’s 6 November initial public offering, swaped Mike Gupta as the company’s chief financial officer. As the person stated, Goldman Sachs and Morgan Stanley are leading the company’s debt offering. Robert Peck, an analyst at SunTrust Robinson Humphrey Inc. said that “This is Noto’s first real impact on the company. He’s smart, he’s financially savvy, and understands that whenever the markets give you an opportunity to raise capital that cheaply, you’ve got to either stuff your coffers for a rainy day or make an acquisition.”
When it comes to the current acquisitions and possession of Twitter; it generated $1.82 billion in its IPO. Moreover, the company has made a number of small acquisitions, together with the purchase of social-data provider Gnip Inc. for $134.1 million in the month of May. Recently, Twitter is also decided to buy CardSpring Inc., a service that lets users redeem deals and discounts through merchants’ tweets, for undisclosed terms. Temporarily, changeable debt offerings lean to send a company’s share price down as buyers evade their purchases by taking short positions in the stock. From Thursday, after the debt offering was announced, Twitter’s shares, which have more than doubled since the IPO, slipped 1.5% in extended trading. The company has a rotating credit line of $1 billion, which it had not valve as of June 30.
Certainly, companies are selling record amounts of debt, seeking to lock in cheap borrowing costs among a 6th year of about 0 interest rates from the Federal Reserve. According to data compiled by Bloomberg, the US corporate bond sales topped $1.07 trillion in the first 8 months of the year, an all-time high. As per the reports, the US technology companies have issued $57 billion in bonds thus far this year comparing with $63 billion in the same period last year. Similarly, Google, owner of the world’s largest Internet search engine, sold bonds in February for the first time in 3 years to re-finance $1 billion of maturing debt, whereas video-streaming service Netflix sold $400 million in senior notes the same month to help finance capital spending, Bloomberg stated.