
Twitter, Inc. Announces $1.3B Convertible Notes Offering - hownottowrite
https://investor.twitterinc.com/releasedetail.cfm?ReleaseID=870236
======
joncooper
Effectively they issue a bond bundled with a bunch of options that may be
exercised in exchange for giving up ownership of the bond, "converting" it to
equity.

This isn't necessarily driven by a view on the equity valuation. It's more
often driven by high realized volatility in the equity, which increases the
value of the equity optionality. Correspondingly this decreases the value of
the fixed income aspect of the bond, which from the issuer's (Twitter)
perspective means they pay less in interest.

Note that "Twitter expects to enter into privately negotiated convertible note
hedge transactions". This means that they will buy call spreads to help manage
the EPS impact of increasing the fully-diluted share count. Realized
volatility and the pricing across strikes of the option chain will be
affected.

------
xutopia
What does this mean in layman's terms?

~~~
jonmcauliffe
twitter would like to borrow money from you. they will pay a reduced interest
rate on the loan. in exchange, you will get the option to convert your loan
into shares of twitter at a designated, unchanging price--likely near the
current stock price.

this is a great deal for twitter, as long as their stock price does not go up.
in other words, twitter is calling the top of the market for its own shares --
to the tune of 1.3B.

bezos did this to great effect with amazon in the late 90s. he did in fact
correctly predict a prolonged stagnation in share price.

~~~
howlin
Of course, the share price stagnation is a bit of a self-fulfilling prophecy.
If the share price rises too much, bond holders will convert and cash out
early. Even the understanding that this is possible puts a damper on peoples'
assessment of the stock's upside potential.

------
ffn
So... are the notes (and associated terms) open to the public? If so, where
does one go about buying it?

------
crazychrome
the burst of social media hype. who'll be the next?

