Snapchat Parent Company to Raise $1 Billion in Debt Financing, Citing Potential Acquisitions

By Todd Spangler

LOS ANGELES (Variety.com) – Snap, the money-losing parent company of Snapchat, plans to issue $1 billion in debt securities for the purposes of working capital and potential acquisitions.

In announcing the plans, said it expects to use the net proceeds from the offering for “general corporate purposes,” which is standard boilerplate. The company also said it may use a portion of the funds “to acquire complementary businesses, products, services, or technologies” or for buybacks of Snap stock.

Snap shares fell as much as 1.5% in early trading Tuesday after the announcement, closing down about 1% to $16.29 per share. Still, that’s up 181% year to date.

It’s the first time Snap would add long-term debt to its balance sheet. As of June 30, the company had $335.7 million in cash and equivalents, as well as $849 million in marketable securities.

The planned debt financing comes after the company returned to solid user growth in the first half of 2019 . For Q2, Snap posted revenue up 48% to $388 million and a net loss of $255 million (versus a net loss of $353 million in the year-earlier period). As of June 30, 2019, Snap reported an accumulated deficit (negative retained earnings) of $6.48 billion.

Snap said the $1 billion in debt securities will be unsecured obligations, with the principal amount of convertible senior notes due August 2026; holders of the notes will receive cash, stock or a combination of cash and stock. The company also intends to grant the initial purchasers of the debt securities an option to purchase up to an additional $150 million principal amount of notes.