Twitter Sells $1 Billion In Junk Bonds To Pay For Stock Buyback

Two weeks ago, Twitter reported disappointing results including a miss on user growth and losing money in 2021, but the stock spiked nonetheless after the “growth” company announced it had approved a $4 billion stock buyback program. The news helped support the slumping stock, sending it briefly to the highest level since the start of the year, before the slide resumed.

However, with the company’s cash just over $6 billion, and Twitter still burning cash, it was obvious that management would need to raise new debt to fund much if not all of this new gift to shareholders. And today it did just that, when it announced that it would tap the junk bond market (TWTR is rated Ba2/BB) to raise $1 billion to fund the company’s stock buyback, as well as pay down existing debt and pursue potential acquisitions. But mostly fund the stock buyback.

*TWITTER REPORTS $1B SR NOTES OFFERING

must fund the buyback

— zerohedge (@zerohedge) February 23, 2022

According to Bloomberg, the eight-year unsecured notes may be sold as soon as Wednesday, and will have a coupon around 5%:

• *TALK: TWITTER $1B 8NCL SR NOTES 4.875%-5%

What about actually spending some of the new debt on growth and/or M&A? The answer, unlikely: “From time to time Twitter evaluates potential strategic transactions and acquisitions of businesses, technologies or products,” the statement said. “Currently, however, Twitter does not have any agreements with respect to any such material strategic transactions or acquisitions.

Which begs the question: while companies have issued billions (if not trillions) in debt in recent years to fund buybacks – which only benefit management and, briefly, shareholders – when will companies actually use debt to fund growth?

Twitter Selling $1 Billion of Junk Bonds to Fund Share Buyback: BBG

remember when companies would issue debt to fund, say, growth? good times.

— zerohedge (@zerohedge) February 23, 2022

Then again if bondholders are still so stupid as to directly transfer funds from their pocket to the pocket of management and shareholders in exchange for a modest pick up in yield, then Twitter would be stupid not to take the money, especially since after the next crash the company can just apply for another PPP loan and get bailed out courtesy of US taxpayers.