- Snap is seeking to raise up to $750 million in a private debt offering after the company's quarterly earnings report exceeded analysts' forecasts.
- Spiegel said in a leaked memo that the move will allow Snap "the flexibility to continue to invest in the long-term growth of our business, even if challenging conditions continue."
- Snap says that with the debt offering, it's also placing an option for initial purchasers to purchase up to an additional $112.5 million of the principal amount of the notes.
- The move comes as the company matures and heads closer to profitability.
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Snap announced Thursday that it is planning to raise up to $750 million through a private debt offering.
In a note to staff obtained by Axios, CEO Evan Spiegel says that the "proceeds from this offering will further bolster our balance sheet which will allow Snap the flexibility to continue to invest in the long-term growth of our business, even if challenging conditions continue."
Why it matters: The move comes just days after the company posted a strong quarterly earnings report, beating analyst estimates on revenue and user growth.
The state of play: Snap says that with the debt offering, it's also placing an option for initial purchasers to purchase up to an additional $112.5 million of the principal amount of the notes.
- Snapchat says this is a "strategic, opportunistic capital raise" and that the company intends to use the net proceeds from the offering for "general corporate purposes, including working capital, operating expenses, capital expenditures," and to pay the cost of the transactions.
- The structure is similar to the $1 billion of convertible debt that it sold last August.
- The debt securities will mature on May 1, 2025, unless repurchased, redeemed, or converted before that time.
Between the lines: The raise comes as Snapchat's business has matured. The company has been getting closer to profitability over the past few quarters and posted its first quarter of positive operating cash flow in the first quarter.
The big picture: Snap isn't unusual in its effort to obtain cash during this uncertain economic period. Dozens of other tech and media companies have raised debt to shore up balance sheets during the coronavirus crisis.
Go deeper: Snap stock soars after strong Q1 user, revenue growth
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