Twitter Inc (NYSE:TWTR) has sold more than expected convertible bonds on late Thursday, says a report from the Wall Street Journal citing two sources familiar with the deal, indicating high demand for its first debt sale.
More demand for Twitter debt
The micro-blogging company sold $900 million of five-year convertible notes carrying a 0.25% coupon and seven-year notes with 1% rate, with a conversion premium of 47.5% for both the issues, according to the sources. The deal can further swell to $2 billion if the initial buyers offer to buy more notes.
Twitter was looking forward to raising funds of around $650 million, but both the sales surpassed and clogged in funds totalling to $900 million.
Investors chose debt as a cushion against equity
It appears that companies are more inclined towards convertible bond issues in the aftermath of the recent financial crisis as they benefit from the low-interest rates and investor demand for yield bearing securities. So far this year 96 U.S. listed convertible bonds have raised $35.1 billion, making 2014, the biggest year since 2008 by the number and values of deals, according to Dealogic.
As stocks are rising higher and making record high, investors are looking for an alternative that could offer some cushion against any probable correction. John P. Calamos, Sr., chief executive and global co-chief investment officer of Calamos Investments said, “From an investor point of view, we’re seeing interest in a way to participate in the equity markets with lower risk, lower volatility.”
Analyst’s positive on Twitter
Canaccord Genuity analysts (Michael Graham, Marla Ripps and Austin Moldow) believe that Twitter is still in its early stage of evolution and has a unique platform. According to the analysts, user experience on the platform will evolve over the next few years. Analysts further believe that the company can even forgo its 140 character tweet over the next few years. Additionally, these analysts are looking forward to Twitter as a better evolved platform, and a richer form of media and for the “following” concept to turn into “more multi-faceted ways of sharing.”
Analysts see a lot of potential in Twitter that can influence public opinion and share most popular content in the world including products, services and people.
The Canaccord Genuity analysts initiated coverage of Twitter Inc with a Buy rating and a price target of $62.