Seemingly Google doesn’t need more cash. It has tens of billions of ready cash on the balance sheet. Why then did they offer some $3 billion in bonds? One explanation is that they wanted to term out the debt. Another explanation is that a lot of their cash is held overseas and it is difficult to get the cash back to the US in a tax-efficient manner. Maybe they are simply building up their cash hoard in anticipation of a big deal. In any event it seems like an opportunity for investors where the earnings yield on the common stock is now in excess of the yield paid on the bonds. In today’s screencast we ask why cash-rich Google is offering bonds?
Items mentioned in the above screencast:
Details of the Google bond offering. (FT)
Why Google wants more cash at the ready. (Marginal Revolution)
Maybe Google didn’t have ready access to the cash. (Mankiw Blog)
The Google carry trade. ( Crossing Wall Street)