Alphabet issues new bonds worth 6 billion euros - Sarmad
Alphabet announced the issuance of new bonds worth 6 billion euros, amid technology market volatility and the impact of artificial intelligence on the financial performance of major companies.
Translated by Qiyas from سرمد — Original source
A memo from one of the deal managers stated that Alphabet, Google’s parent company, issued €6 billion ($6.7 billion) in bonds in a test of investor appetite following a recent wave of selling in tech stocks and bonds amid concerns about the artificial intelligence sector.
A memo from a bank arranging the sale showed that Alphabet offered the bonds in seven tranches, with total demand exceeding €17 billion.
The bonds have maturities ranging from two to 19 years. They include one tranche with a floating interest rate and six tranches with fixed rates, according to a filing with the U.S. Securities and Exchange Commission (SEC).
The offering is the company’s second euro-denominated issuance this year. In May, Alphabet sold €9 billion in bonds across six tranches, following a rare sale of 100-year sterling-denominated bonds in February.
Concerns over the funding needed to support massive AI spending and the returns required to justify those investments have pressured tech stocks and bonds in recent weeks. The Nasdaq, which lists shares of major tech companies, fell 5% in October.
The latest wave of volatility was driven by disappointing quarterly results from Alphabet and Amazon, two of the largest spenders on data centers. Alphabet said it intends to use the net proceeds of the offering for general corporate purposes, which may include repaying existing debt.
According to the SEC filing, Barclays, BNP Paribas, and Deutsche Bank are the joint book-running managers of the issuance.
Alphabet’s share price fell more than 12% last Thursday, marking its worst single-day performance ever, wiping out approximately $500 billion from its market value after its quarterly results showed slower-than-expected growth in Google Search and cash burn that worried investors. The company expects capital expenditure this year to reach $205 billion.
The filing revealed that as of September 30, Alphabet had entered into lease agreements, mostly for data centers, that have not yet commenced, with future payment commitments of $130.5 billion not yet recorded on its balance sheet.
In contrast, Microsoft was the only major tech company to generate positive cash flow in the last quarter.
Nevertheless, analysts expect major tech companies to increase bond sales in Europe to fund infrastructure investments, taking advantage of the depth and liquidity of the region’s debt markets.
Alphabet’s share price rose about 1% in pre-market trading. The U.S.-listed stock had fallen roughly 19% in October, recording its worst monthly performance ever.
