Oracle to price $10B stock sale at 11% discount: report

Oracle ↘ 8.76% filed on Monday, November 2, to sell $10 billion of common stock and $10 billion of senior notes. The two offerings use up, in a single day, the entire $20 billion cap on new capital-markets funding the company had set at its investor day five days earlier. Late Monday, Bloomberg reported that Oracle was poised to price the share sale at $116 per share. That is an 11% discount to Friday's close of $130.67, before the deal was announced, according to people familiar with the matter.bloomberg.com+1

Investors pushed back. Oracle shares closed down 8.8% at $119.22 on Monday, bringing their losses this year to about 39%. By Yahoo Finance's calculations, it was the stock's worst day since June, and its nearly 18% drop over three sessions was its steepest three-day decline since 2002.finance.yahoo.com+1

Terms of the offerings

Oracle said the proceeds will go toward general corporate purposes, which could include capital spending, debt repayment, dividends and future investments or acquisitions. The notes come in six tranches maturing between 2029 and 2046, one floating-rate and five fixed-rate. Interest rates and share counts had not been set when the filings were made. The two deals do not depend on each other. Morgan Stanley ↗ 0.78% and Goldman Sachs The Goldman Sachs Group, Inc. ↗ 0.47% are among the bookrunners on the stock sale.investinglive.com+2

At Friday's price, the stock sale would have meant about 76.5 million new shares, raising Oracle's share count by roughly 2.5% to about 3.1 billion. Pricing at a discount means issuing more shares. The new equity comes on top of roughly $20 billion of stock Oracle sold earlier this year.finance.yahoo.com+1

Debt load under scrutiny

Oracle burned through about $24 billion in cash in its last fiscal year. It had about $125 billion of debt as of August, nearly twice its shareholders' equity. Its existing 6.85% bonds due 2066 fell more than 1.2 cents on the dollar on Monday.businesstimes.com.sg+1

The rating agencies held their ratings for now. Fitch kept Oracle at BBB and said that "following this capital raise, Fitch does not expect Oracle to raise material incremental capital over the rating horizon." Moody's affirmed its rating but kept a negative outlook.finance.yahoo.com

Oracle has said its capital spending will peak this fiscal year and next, then fall in fiscal 2029, when it expects to start funding its own growth. Until then, InvestingLive noted, demand for the bonds will be a key test of how willing credit markets are to lend to AI borrowers that, unlike cash-rich hyperscalers, depend on outside capital.morningstar.com+1