Twitter is planning to raise up to $1.5bn in its first debt offering since the company went public in November last year.
Twitter said that some of the cash from the debt offering would go towards paying for these hedge transactions and the rest would be used for very vague “general corporate purposes”.
The microblogging network will issue two convertible senior notes worth $650m each, due to mature in 2019 and 2021. The debt will be offered in private placements and will allow for an extra $100m on each note if they end up over-subscribed, the firm said in a company filing.
The notes can be converted into cash or Twitter stock or a bit of both at the firm’s discretion and the company will hedge the debt to make sure its common stock doesn’t get too diluted and the price doesn’t swing too widely. In other words, once the price of the notes is set, Twitter’s hedge counterparties will buy shares or share derivatives to balance the activity of the debt.
The network has yet to turn a profit and has been dabbling in ways to make money, including advertising and the recent addition of a “buy” button for users to click on.
Shares in the firm, which had gained 4.5 per cent during the day, dropped 1.5 per cent in pre-market trading after it announced the debt plans. ®