Snap looks to raise up to $750 million in debt offering

Snap announced Thursday that it is planning to raise up to $750 million through a private debt offering.

In a note to staff obtained by Axios, CEO Evan Spiegel says that the "proceeds from this offering will further bolster our balance sheet which will allow Snap the flexibility to continue to invest in the long-term growth of our business, even if challenging conditions continue."

Why it matters: The move comes just days after the company posted a strong quarterly earnings report, beating analyst estimates on revenue and user growth.

The state of play: Snap says that with the debt offering, it's also placing an option for initial purchasers to purchase up to an additional $112.5 million of the principal amount of the notes.

• Snapchat says this is a "strategic, opportunistic capital raise" and that the company intends to use the net proceeds from the offering for "general corporate purposes, including working capital, operating expenses, capital expenditures," and to pay the cost of the transactions.
• The structure is similar to the $1 billion of convertible debt that it sold last August.
• The debt securities will mature on May 1, 2025, unless repurchased, redeemed, or converted before that time.

Between the lines: The raise comes as Snapchat's business has matured. The company has been getting closer to profitability over the past few quarters, and posted its first quarter of positive operating cash flow in the first quarter.

The big picture: Snap isn't unusual in its effort to obtain cash during this uncertain economic period. Dozens of other tech and media companies have raised debt to shore up their balance sheets during the coronavirus crisis.

More from Spiegel's memo:

• "This is a strategic, opportunistic capital raise to help us continue achieving our vision for the long-term. Convertible notes remain an efficient vehicle to raise capital, and investor demand for these types of convertible notes remains strong in the current environment."

• "We still have lots of work to do, and remain excited about our long-term opportunity. The proceeds from this offering will further bolster our balance sheet which will allow Snap the flexibility to continue to invest in the long-term growth of our business, even if challenging conditions continue."
• "Our products enable us to shape the future of how people experience the world around them, and to combine what they see in the real world through our camera with all that’s available to them in the digital world. We will continue to focus on recruiting top talent, and developing our augmented reality, content, and gaming platforms to enhance the Snapchat experience for our community and make a positive difference in the lives of people who use our products."

Go deeper: Snap stock soars after strong Q1 user, revenue growth