It appears that the historically cheap borrowing costs of the Covid-19 era were too good to resist, even for a company with a $1.6 trillion market cap, such as Amazon. The online retail giant is planning to sell bonds to buy back stock and refinance debt in what is its largest bond offering to date.
According to Bloomberg, which cited people familiar with the matter, Amazon originally issued a debt offering to the tune of $15 billion, which was later upsized to a whopping $18.5 billion spanning over eight parts. The longest segment, a 40-year security, is expected to yield 95 basis points above Treasuries, following a preliminary price point at around 115 basis points.
Albeit Amazon doesn’t actually need to raise capital in such a magnitude, given that it comfortably sits on tens of billions of dollars in cash, but historically low interest rates proved to be too tempting to forego. The latest offering is expected to be Amazon’s largest bond sale on record, and the second-largest this year following Verizon’s Communication Inc.’s $25 billion offering in March.
The offering also comes two weeks after Amazon released a skyrocketing earnings report for the first quarter of 2021, as well as a sales forecast that significantly surpassed that of all analyst estimates. The company’s cash, cash equivalents, and marketable securities totalled a staggering $73 billion by quarter end in March, approaching its all-time high.
Surprisingly, despite Amazon’s extensive tickle trunk of goodies that will be spent over the next several days to buy back its stock, the retail giant’s shares are down nearly 3%, and trading under $3,200 per share.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.