Tomahawk, WI 09/11/2014 (Basicsmedia) – Twitter Inc. (NYSE:TWTR) is set to give its cash balance a makeover after it emerged it was planning to raise up to $1.5 billion from the debt markets. The debt has already elicited concerns according to Bloomberg’s Corry Johnson as to whether the company needs more time frame to reach profitability, where it can be able to finance its operations without pursuing external financing.
Twitter is reportedly planning to use the amount to spur growth in its advertisements segment, to compete on the same level against Facebook Inc. (NASDAQ:FB) and Google Inc. (NASDAQ:GOOG). The debt offer according to Bloomberg’s Sarah Frier is almost the same amount that the giant social company raised on its IPO that was about $1.8 to $1.9 billion.
“It sounds like I mean they are not expected to be profitable this year or very soon in the future at all, and they want to continue to expand their business expanding overseas; they are making big acquisitions. They acquired Gnip the data provider earlier this year for more than $100 million so they really want to have all of the potential to expand their business, said Mrs. Frier.
Twitter Inc. (NYSE:TWTR) pursuing financing at this time could also be’ seen as one of the ways of tapping into the market before interests rates are hiked, making it extremely expensive to do the same. The debt announcement comes at a time that the company has just appointed a new CFO, Anthony Noto, of whom Frier believes might have had a lot of saying on Twitter push for debt from the markets
“Who knows that the market might sour on this growth position companies? Twitter is basically betting that the market wants to see growth they want to see fast expanding business and doesn’t care so much about profitability or how first revenue is going to expand or even the user base […] so got to get the money while it’s there, while its cheap,” said Mrs. Frier
Johnson also argued that it is quite surprising to see a tech company such as Twitter Inc. (NYSE:TWTR) opting to raise money through debt instead of selling stock.