Twitter surprises with sale of bond

Twitter’s decision to sell a high-yield bond is unusual for a tech company that does not need the money and has no clear plan for it. The online platform has only just attained profitability. But with just under $6bn in cash and positive free cash flow it is self-sufficient. Compare that to notorious cashburning companies such as Netflix and Tesla, which must turn to capital markets to keep operations on track.

Yet Twitter’s eight-year $700m bond comes at a time when low interest rates mean low borrowing rates. The bond was marketed with a yield of 4.5% but priced at 3.875%. This is about two percentage points below the average junk bond yield. With rates this good, why not issue a bond as a financial cushion and show off your ability to raise money with ease?

The success is heartening after a morale-sapping few months. Third-quarter earnings showed a serious slowdown in revenue growth, efforts to rid the site of bots have led to a dip in user numbers and a technical problem is being blamed for lower advert pricing. Twitter has lost a third of its market value from a high point in September.

A successful bond sale should put a little more spring in the firm’s step. But it would be good to see Twitter come up with a more interesting plan than rainy-day funds. In troubled times there was speculation that Twitter would end up in the hands of a buyer such as Microsoft or Disney. Now Twitter is the one making acquisitions.

The focus has been on machine-learning companies, including Fabula AI, a start-up that can detect the spread of misinformation. That will improve the experience for users. Acquisitions that improve advertising sales would be equally welcome. /London, December 6

© The Financial Times 2019