Airbnb recently tapped Goldman and Morgan Stanley, to help raise $2 billion of debt, at high rates. Private tech companies typically have a harder time borrowing money from traditional lenders than public firms do, because they don’t have the cash flow to borrow against and they lack credit ratings. This often leaves convertible loans as the only option.
Snap on Thursday said it would raise $750 million in convertible notes to bolster its cash reserves, a day after it announced better than expected earnings. CEO Evan Spiegel called the move “opportunistic capital.” Slack, which has seen a boom in business coming from people working from home, raised $750 million in convertible notes earlier this month, at a 0.5% interest rate. Goldman Sachs works with both firms. One advantage of convertible debt for public companies is that it won’t convert to equity unless the stock has risen significantly. “More companies need it now than they thought they did a few months ago,” Giovanni said.