Twitter taps debt markets for the first time to raise $1.5 billion
11 Sep 2014
Twitter Inc which is tapping debt markets for the first time, would raise around $1.5-billion to invest in acquisitions and expansion, Bloomberg reported.
The San Francisco-based micro blogging portal plans to sell convertible bonds in two $650-million pieces, one set to mature in five years and the other due in seven years, the company said in a regulatory filing today.
The size of the offering might amount to $1.5-billion if the banks involved decide to participate.
Twitter, which was not projected to be profitable this year, had been investing to build up its advertising business and recruit engineers who could help tweak its product to appeal to a broader audience. Executives see an opportunity in the debt market to raise more cash cheaply without immediate dilution of their shareholders' ownership, according to a person familiar with the matter. According to the person, the company was inspired by technology leaders, including Google Inc and Netflix Inc, successfully offering debt while borrowing remained inexpensive.
The decision comes two months after the company replaced Mike Gupta, its chief financial officer, with Anthony Noto, a former Goldman Sachs Group Inc banker who helped with Twitter's 6 November initial public offer.
Twitter did not disclose what it intended to do with the proceeds, apart from paying for the cost of hedging the transactions to minimise the dilution of common shares, earmarking the funds only for ''general corporate purposes,'' Forbes reported.
Earlier, on Wednesday, UBS analyst Eric Sheridan increased his rating on Twitter to buy, citing stronger advertising momentum and noting that the upside driven by digital advertising ''can be achieved with little added [operating expense] versus our prior estimates.''
Given the amount Twitter's potential billion-dollar-plus war chest could certainly fund a major acquisition, according to commentators.
Twitter stock, which was up 4.5 per cent yesterday, was down 1.5 per cent in after-hours trading on news of the capital increase.