Unsecured bonds from Twitter: reasons for the issue
Twitter announced its plan to release unsecured bonds to the market, the total amount of which will be $600 million. The papers have a term of 8 years and will have to be repaid by 2027. The bonds are intended for purchase only by institutional investors, and the private person will not be able to buy them.
This is the first time an American internet company will release papers of this kind. According to unverified data, their initial yield will be about 4.5%.
Unsecured bonds are issued by large companies. They are characterized by debt that is not collateralized. In this case, the name of the corporation guarantees a refund.
In 2014, Twitter issued convertible bonds, resulting in $935 million. In 2018, in order to repay the debt on the previous papers, the company again issued bonds worth $1.1 billion, which will have to be repaid in 2021 and 2024, 954 million and $1.15 billion.
Convertible bonds differ from unsecured bonds in that their holder has the right to refuse to repay the debt in exchange for company shares. A specially established ratio is used for this exchange. This type of bond is most often used in the case of start-ups, as investors are interested in business growth rather than debt repayment.
Another type of securities is government bonds; they are considered the most reliable and are issued by the Ministry of Finance or another agency. Bonds of state large companies have a high level of guaranteed payments..
Twitter is a service that allows you to post small text messages, images and videos. Its peculiarity and difference from other social networks is that these messages can be seen by everyone. The service was founded by Odeo in 2006 as a platform for internal use, and later became world famous.
Recently Twitter presented financial analytics, which became one of the factors of unsecured bonds issues. Profit for the quarter was about $823 million and showed an increase of 8.6%. Despite the fact that the revenue increased compared to the previous period, the figure did not meet the expectations of analysts, who predicted 876 million dollars.
According to the data, advertising revenue rose to $702 million, while previously it had been observed at $650 million. At the same time, net income decreased from $789 million to $36.5 million. This picture means that the value of one share decreased to $0.05 from $1.02.