(Bloomberg) — Alphabet Inc.’s surprise $80 billion sale of equity to fund spending on artificial intelligence infrastructure is expected to become the biggest equity capital markets transaction of all time, according to data compiled by Bloomberg.
Most Read from Bloomberg
The combined offering, whose common and capital stock and equity-like mandatory convertible preferred portions are set to price later Tuesday, would top Brazilian oil producer Petroleo Brasileiro SA’s roughly $70 billion sale of common and preferred stock in 2010.
The largest single portion of the Google owner’s deal, a $40 billion at-the-market offering, is expected to begin in the third quarter. These offerings allow the company to sell shares into the market from time to time without making an announcement, though the amount raised must be disclosed periodically in regulatory filings.
Just days before SpaceX is expected to start marketing what potentially will be the biggest IPO of all time, Alphabet stole its thunder Monday with its announcement. It includes $15 billion from the marketed sale of common stock, $15 billion from the concurrent sale of a mandatory convertible sale and a $10 billion private placement to Berkshire Hathaway Inc.
Berkshire is buying Alphabet’s Class A shares and Class C shares at a discount of 6.5% to their respective closing prices Monday before the deal was announced.
The common equity and mandatory offerings have drawn orders for multiple times the number of shares available, according to people familiar with the matter. A representative for Alphabet didn’t immediately respond to a request for comment.
The $15 billion mandatory portion of the offering is similarly unprecedented in its size, easily topping Boeing Co.’s sale of $5.75 billion of mandatory convertible preferred stock as part of a broader $24 billion equity raise in 2024, and Oracle Corp.’s sale of $5 billion of the same type of securities earlier this year. Unlike traditional convertible bonds, mandatory convertible preferred stock must convert into common shares at a specified date. Alphabet’s offering converts in three years, which is typical.
Mandatory offerings can be attractive to companies because they are usually a cheaper source of financing than debt, allow companies to defer the dilution from issuing shares immediately, and are treated by ratings agencies as equity rather than debt.
Leave a comment