Since going public, Twitter has struggled a bit as it has to contend with slowing user growth. While the company has vowed to combat this problem, that will also take money. And since the company is still operating at a net loss, which leaves one option: it needs to raise money.
So, the publicly traded company announced on Wednesday that it will be looking to raise a big sum: between $1.3 billion and $1.5 billion, through the sale of convertible notes. There will be two $650 million debt offerings, one due in 2019 and the other due in 2021, with an addition $100 million up for sale in each round “to cover over-allotments, if any.”
Twitter needs the money, as its losses have been growing. In the most recent quarter, Twitter reported revenue of $312 million, up 124% year to year. At the same time, though, it’s losses deepened severely in the same time period; GAAP net loss was $145 million, compared to a net loss of $42 million in the same period last year.
So once it raises the above state funds, what will Twitter do with it? The language that Twitter is pretty vague about that:
“Twitter expects to use a portion of the net proceeds of the offering of the notes to pay the cost of the convertible note hedge transactions described above (after such cost is partially offset by the proceeds to Twitter of the warrant transactions described above), and to use the remaining proceeds of the offering for general corporate purposes.”
“General corporate purposes” tells us exactly nothing, of course. VatorNews has reached out to Twitter for more information regarding what it plans to do with the money it will raise. We will update if we learn more.
Some have already been speculating that the company will use the funding for acquisitions, and that seems like a distinct possibility. After all, Twitter has bought 13 companies since the beginning of 2013, and using this funding could help the company bolster its revenue, and bring in new users.
The new funding may also allow the company to diversify its revenue streams. Of its revenue last quarter, $277 million came from advertising, and the company has recently shown that it wants to branch out, specifically into e-commerce, with a launch of a new “buy button.”
Of course, it’s far from unprecedented for a publicly traded company to borrow money in this matter, especially when interest rates are low. Netflix did the same thing earlier this year, with plans to raise $400 million; as did Google, with plans to raise $1 billion
(Image source: c2c.bigfuel.com)
