At lowest-ever price, Google owner Alphabet borrowed record $10 billion bond on Monday, August 3 2020. The reason for Alphabet selling such a large bond is due in part to the economic situation. The coronavirus pandemic strain on most including Alphabet which last week reported its first ever quarterly sales drop. However, the companies share prices which should have been affected were not thanks to Google’s ads business. Indeed, Google is one very small number of companies that are on effective or are thriving in the current economy. In other words, while most of the market is during this dangerous recession Google is growing. However, that’s not enough to keep Alphabet financially stable thus they have sold the bond.
Alphabet Bonds were sold, the lowest-ever price of, at a coupon rate of 0.45%. This is a historic sale as in the history of US corporate bonds no has sold that maturity. Indeed, this is the first in the recorded history of bond sales that started in 1980. What Alphabet is doing is essentially borrowing money from various investors. Specifically, the investors will buy the bonds which is essentially a promise of payment from Alphabet. As a result, Alphabet now has five years to fully pay back the bond price with interest to the purchasers. A buying frenzy ensued as a result of financial security of Google combined with the coupon rate of 0.45%.
Indeed, the bond is only for $10 billion it generated more than three times that in demand. Additionally, this is the company’s lowest-ever price for a bond of this nature. Indeed, the last lowest-ever price for Alphabet the coupon rate was 1.25%. Alphabet, that has already stated how the money generated on sale will be used. Specifically, $4.5 billion will be used for general operating purposes and expenses. The remaining $5.5 billion will be used for green initiatives, though the company has not stated what these are. Additionally, this marks the largest ever amount of corporate bond money set aside for environmental initiatives, another historic first.