Tech & AI
Oracle Files to Raise $20 Billion in Stock and Bonds for AI Build-Out
The software group is selling $10 billion of new shares and $10 billion of notes at once, and its stock fell on the news.
HedgeWeekly Tech & AI Desk ·
Oracle filed on Monday to sell $10 billion of common stock and $10 billion of senior notes, a $20 billion package to help pay for its AI and cloud data-centre expansion. At Friday's close of $130.67, the equity portion would mean about 76.5 million new shares, roughly 2.5% of those outstanding, though the final price and share count are not set.
The notes are planned in six tranches maturing between 2029 and 2046, one at a floating rate and five at fixed rates; pricing has not been announced. The two offerings are independent, so one can proceed without the other. Oracle describes the proceeds as for general corporate purposes, which can include capital spending, debt repayment and investments.
Oracle shares fell roughly 4% to 6% on the day depending on the source, and are down about 33% this year. The company's latest quarter showed negative free cash flow of $5.4 billion and a 55% rise in interest expense to $1.4 billion, against remaining performance obligations (contracted future revenue) of $664 billion. It had already sold $20 billion of stock through an at-the-market programme in the first quarter.
Why it matters: Oracle's customer backlog is large, but it is financing it with a mix of new equity and debt while cash flow is negative, which keeps credit spreads and dilution in focus for the whole AI-infrastructure trade. Watch how the bonds price relative to existing Oracle debt, the size of the final share sale, and whether management gives a timeline for positive free cash flow.