Technology companies have sold more than $100 billion of bonds so far this year, which seems like a lot considering that’s equal to the size of Ecuador’s economy and bond issuance is poised to set a new record.
But it’s really not. It’s a drop in the bucket for these companies. And it would be surprising if the tech bond binge doesn’t accelerate in the coming months and years. Already this year, tech companies have sold about as much investment-grade U. S. debt as they did in all of 2015, and double the level of 2014.
Apple, Microsoft and Google parent company Alphabet are responsible for more than 40 percent of the 2016 tech bond sales. Those three companies don’t really need the money; they have a combined $423 billion in cash plus short- and long-term securities. But most of their cash is parked overseas, and if the companies tapped the cash they would have to pay U. S. corporate income taxes.
Bond buyers are helping fill the cash gap. Microsoft this week sold $19.75 billion in bonds to help pay for its proposed acquisition of LinkedIn. Apple in recent days sold $7 billion in bonds – its seventh multibillion-dollar debt sale since 2013 – to finance its huge share repurchases and dividends to stockholders. Alphabet is using its $2 billion of fresh bond salesto repay old debt.
This post was published at David Stockmans Contra Corner By Lisa Abramowicz and Shira Ovide, Bloomberg Business ‘ August 9, 2016.
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