Oracle launched a $20 billion equity and debt financing on Monday. Despite increasing signs that asset management firms are uneasy about the massive spending by technology companies, the company is still moving forward with its plans to raise funds for investments in artificial intelligence.
Oracle stated in the documents submitted separately that the company is issuing $1 billion in investment-grade bonds and a similar amount of common stock. Oracle said that the funds obtained will be used for general corporate purposes, which may include capital expenditures and dividend payments.
Just a few days ago, Oracle announced a long-term financing plan to raise funds for its substantial investment in AI. This news temporarily alleviated investors' concerns about whether the returns on its AI infrastructure investments would be satisfactory. However, by Monday, Oracle's stock price had fallen to its lowest level since July, its bonds weakened overall, and the cost of debt default insurance also increased.
"As the infrastructure construction of AI progresses, enterprises' demand for capital seems to have no end. They are trying every means to find sources of funding," said Michael Reynolds, Vice President of Investment Strategy at Glenmede. "However, at present, investors are still skeptical about what the growth story of AI will ultimately look like."
According to an informed source, Oracle's bond issuance this time is divided into six tranches, with maturities ranging from three years to 20 years. As the source was not authorized to comment publicly, they requested to remain anonymous. The informed source stated that the initial price guidance for the bond with the longest maturity is about 3.6 percentage points higher than the yield of U.S. Treasury bonds.
According to relevant documents, Bank of America is also taking the lead in this bond and stock issuance.
Meanwhile, Meta Platforms Inc plans to hold a teleconference with investors before the potential issuance of cross-border investment-grade bonds, which will further test investors' demand for technology company bonds.
