Amazon Bond Offering Upsized To $18.5BN, Its Largest Ever, Ahead Of Buyback Frenzy

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by Tyler Durden
Monday, May 10, 2021 - 03:21 PM

Update 3:15pm: earlier we said that Amazon's first bond offering in almost a year "is expected to be in the $10-$20BN range and will be vastly oversubscribed", and we were spot on: the original offering closed on the mid-point, $15 billion... before getting upsized to $18.5 billion. As a result of the strong demand, the longest portion, a 40-year security, will yield 95 basis points over Treasuries, after initial price talk around 115 basis points, Bloomberg reported.

At $18.5 billion, it would be Amazon’s biggest bond sale ever, and the second-largest this year behind Verizon Communication Inc.’s $25 billion offering in March. It comes less than two weeks after Amazon reported record earnings for the first quarter and provided a sales forecast for the current period that was stronger than all analyst estimates. Cash, cash equivalents and marketable securities stood at $73 billion at the end of March, near an all-time high. Ironically, Bloomberg notes that Amazon, which has tens of billions in cash, doesn't actually need the newly raised capital, but the "cheap borrowing costs prove too tempting to resist."

Curiously, despite the brand new massive war chest of "dry powder" that will be spent in the coming days on buying back its stock, AMZN shares are down almost 3%, trading just below $3,200 on the back of a broad selloff in the Nasdaq that has hammered all tech names.

We expect the AMZN weakness will reverse in the coming days as Goldman's buyback desk is tasked with VWAPing the stock price some $200 higher to allow Jeff Bezos to sell even more billions at a higher average price.

* * *

Having fallen over 10% from its all time high hit just a week ago, and currently in correction territory despite posting blockbuster results ju, Jeff Bezos - who has been in a stock selling spree lately - is making it clear that this aggression against his currency of choice will not stand, and on Monday morning announced a jumbo bond offering in 8 parts to refinance debt and buy back stock in its first offering in nearly a year.

The size of the offering, which is expected to price today, is unknown but is expected to be in the $10-$20BN range and will be vastly oversubscribed. Price talk is shown below, courtesy of Bloomberg:

USD 2Y Fixed (May 12, 2023) IPT +30 Area

  • MWC
  • See security information: 2Y Fixed

USD 3Y Fixed (May 12, 2024) IPT +45 Area

  • MWC
  • See security information: 3Y Fixed

USD 5Y Fixed (May 12, 2026) IPT +55 Area

  • 1-month par call, MWC
  • See security information: 5Y Fixed

USD 7Y Fixed (May 12, 2028) IPT +65 Area

  • 2-month par call, MWC
  • See security information: 7Y Fixed

USD 10Y Fixed (May 12, 2031) IPT +75 Area

  • 3-month par call, MWC
  • See security information: 10Y Fixed

USD 20Y Fixed (May 12, 2041) IPT +90 Area

  • 6-month par call, MWC
  • See security information: 20Y Fixed

USD 30Y Fixed (May 12, 2051) IPT +100 Area

  • 6-month par call, MWC
  • See security information: 30Y Fixed

USD 40Y Fixed (May 12, 2061) IPT +115 Area

  • 6-month par call, MWC
  • See security information: 40Y Fixed

As Bloomberg adds, Amazon has been a fairly infrequent issuer, but when it comes, it comes in big on those rare occasions, and unleashes a massive buyback spree as soon as the new cash is wired, sending its stock price bursting higher. It last tapped the bond market in June 2020, borrowing $10 billion for general corporate purposes in what was then the lowest rate in the history of the bond market, with the proceeds used to repurchase stock and sent AMZN stock soaring 40% higher in the next 3 months. Prior to that, it sold $16 billion of bonds in 2017 to help finance its acquisition of Whole Foods Market Inc.

The company announced that it intends to use the net proceeds from the sale of the notes for general corporate purposes, which may include, but are not limited to, repayment of debt, repurchases of outstanding shares of common stock, acquisitions, investments, working capital, investments in our subsidiaries, and capital expenditures."

The two-year bond will be allocated for eligible green or social projects.

"We intend allocate an amount equal to the net proceeds from the sale of the Sustainability Notes to finance or refinance, in whole or in part, green or social Eligible Projects (as defined herein)."

JPMorgan, Citigroup, Morgan Stanley and Wells Fargo are managing the sale.