Snap prices $550 million in senior notes, plans debt repurchase

SANTA MONICA - Snap Inc. (NYSE:SNAP) announced Thursday the pricing of $550 million in senior notes due 2034 with an interest rate of 6.875%, according to a company press release. The social media company, currently valued at $12.7 billion, operates with a moderate debt level according to InvestingPro analysis, which shows the company maintains strong liquidity with a current ratio of 3.88x.

The notes, which will be senior unsecured obligations of the company, are expected to close on August 12. Interest will be paid semiannually beginning March 15, 2026, with the notes maturing on March 15, 2034.

Credit rating agencies have assigned mixed ratings to the offering, with Moody’s giving a B1 rating with positive outlook, Fitch assigning a BB rating with stable outlook, and Standard & Poor’s providing a B+ rating with stable outlook.

Snap expects to generate approximately $541.3 million in net proceeds after deducting discounts, commissions, and estimated expenses. The company plans to use these funds, along with cash on hand, to repurchase portions of its existing convertible senior notes: $157.4 million of notes due 2026, $246.3 million due 2027, and $185.8 million due 2028, for a total repurchase price of $550.1 million.

The company noted that holders of the repurchased notes may subsequently buy Snap Class A common stock in open market transactions or adjust derivative positions related to their Snap holdings, potentially creating upward pressure on the stock price. This comes as Snap trades near its 52-week low of $7.08, with the stock down approximately 17% in the past week. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the platform’s exclusive Fair Value model.

The notes are being offered only to qualified institutional buyers under Rule 144A of the Securities Act and to non-U.S. persons outside the United States under Regulation S. They have not been registered under the Securities Act or state securities laws.

Snap Inc., which describes itself as a technology company focused on camera technology and visual communication, stated the offering is subject to customary closing conditions.

In other recent news, Snap Inc. announced plans to offer $500 million in senior notes due in 2034 through a private placement. This move comes as the company faces challenges following its second-quarter financial results. Snap’s revenue for the quarter met expectations, but its EBITDA fell $6 million short of analyst estimates, according to Cantor Fitzgerald. The company’s ad revenue growth slowed to 4% year-over-year, partly due to temporary issues with its ad platform.

Analysts have responded to these developments with adjustments to their price targets for Snap. RBC Capital lowered its price target from $12 to $10, citing difficulties with ad platform development. Guggenheim also reduced its price target to $8, pointing to mixed second-quarter results and slowing growth trends. Rosenblatt Securities adjusted its target to $8.70, following a mishap in Snap’s ad auction system that led to unintended inventory discounts. Despite these challenges, Cantor Fitzgerald and Guggenheim maintain a Neutral rating on Snap’s stock.

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