Twitter Raises $1.8 Billion After Boosting Debt Offering
http://www.bloomberg.com/news/2014-09-12/twitter-increases-convertible-debt-sale-to-1-8-billion.html
The investors of these bonds snapped up Twitter's offering at rates lower than a five-year industry average, rewarding the company with funds to back acquisitions and to pay for an expansion. Twitter is not really predicted to be very profitable in 2014. So they have been investing to build up their advertising business and add engineers who can help tweak their products to attract more customers.
The five-year notes will pay 0.25% and the seven-year notes will pay 1% point, according to the filing. These are lower than the average 1.5% paid by Internet media companies on convertible debt since 2009.
Twitter's five-year bonds were marketed by lead banks Goldman Sachs and Morgan Stanley between 0% and 0.5%, and the other bonds between 0.75% and 1.25%. After the IPO, Twitter executives saw an opportunity to increase cash cheaply in the debt market without instantaneously diluting shareholder's stakes. Twitter was inspired by Google and Netflix in successfully offering debts while borrowing remains inexpensive.
This is a pretty smart move for twitter in my opinion. Rather than trying to push themselves to do better in a year they have projected to go poorly, and possibly harming the company, they are choosing to invest in its future with a huge move like this.
ReplyDeleteI also think boosting debt offering is a great idea for Twitter. They are already a huge social network, but still want to expand even further. With this move, they show a lot of ambition for the future.
ReplyDeleteI think that using a debt offering is a great way to gain enough capital to expand Twitter as a company. However, I wonder what Twitter will actually do with these funds because although they have raised 1.8 billion dollars, Twitter as an app doesn't seem to have much more growth potential. I wonder if Twitter is planning on creating a new app, or investing more money into one of their many acquisitions.
ReplyDeleteIf I was one of the people that bought those I would of had to be feeling pretty optimistic that day because I feel these are risky investments. While twitter is a popular social media now, in 5 or 7 years it could just fade into the darkness. Especially in the social media industry new mediums pop up constantly and competitors try to copy existing products. If twitter wants to keep being one of the most popular social medias it will really need to keep changing and updating its image over the next several years.
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