Key points:
- Snap issues $1.25B convertible senior notes offering
- SNAP stock dropped 5% in the latest move in a volatile week for the company
- The company might be looking into acquisitions or alternative revenue strategies
Snap (NYSE: SNAP) has a whirlwind of a week, in an earnings flurry that illuminated some future headwinds for social tech companies like Snap and Facebook. Changes to Apple’s data rules restricted normal advertising revenue, and with Snap competitor TikTok honing in on the company’s demographic; investors are left curious regarding future monetization and avenues to long-term growth.
Snap stock plummeted following earnings but rebounded the following day. Today, SNAP is down 5% with Tuesday’s opening bells, on the news the company will be issuing $1.25B of convertible senior notes.
Initial purchasers will be given the option to purchase up to an additional $200M of notes, and interest on the notes will be payable semi-annually in arrears. Normally, when a company offers convertible notes; it’s a clear-cut sign of a shortage in funding, commonly seen in startups that are in their high-growth phase.
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For Snap, we can only assume the company is taking action towards re-analyzing possible monetization routes or acquisitions. In connection with the note pricing, Snap also intends to enter into capped call transactions with one or multiple of the initial purchasers of the notes.
The last week has been a wild ride for Snap investors, and the market didn’t react kindly to the $1.25B note decision, sparking a 5.5% sell-off. It’s all a matter of direction for Snap now, and maybe with increased funding, the company will be able to shift towards strategies that will bolster efforts to stabilize revenue.
