It didn’t take long for former Goldman Sachs banker Anthony Noto to make his mark as CFO of Twitter. Just two months after he replaced Mike Gupta, Twitter announced an offering of $1.5 billion in convertible debt that is its first venture into the bond markets.
Twitter CFO Anthony Noto
The bonds will be sold in two tranches of $650 million — one a five-year due in 2019 and the other a seven-year due in 2021 — the social media giant said in a regulatory filing Wednesday. Another $200 million may be offered if purchasers exercise an overallotment option.
Twitter, which raised $1.82 billion in its initial public offering last year, disclosed only that the proceeds from the debt sale will be used to pay for the cost of hedging the transactions to minimize the dilution of common shareholders and for “general corporate purposes.” But Forbes reported that the potential war-chest “could certainly fund a major acquisition or the acceleration of other initiatives.”
Citing a source familiar with the debt offering, Bloomberg said Twitter executives “see an opportunity in the debt market to raise more cash cheaply with little immediate dilution of their shareholders’ ownership.” Other technology leaders, including Google and Netflix, have recently offered debt successfully while borrowing remains inexpensive amid a sixth year of near-zero interest rates from the Federal Reserve.
Goldman Sachs and Morgan Stanley are leading Twitter’s offering.
“This is Noto’s first real impact on the company,” Robert Peck, an analyst at SunTrust Robinson Humphrey, tells Bloomberg. “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.”
Twitter has made several small acquisitions, including the purchase of social-data provider Gnip Inc. for $134.1 million in May. According to Bloomberg, the company has been investing “to build up its advertising business and add engineers who can help tweak its product to appeal to a broader audience.”
Twitter’s shares have more than doubled since the IPO. The stock rose 0.4% to $53.12 in trading Thursday.
