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<blockquote data-quote="Dheepa" data-source="post: 79598" data-attributes="member: 1572"><p>What's really interesting to me about this bond issuance is the fact that Amazon technically doesn't need this money. According to the FT, the company is apparently sitting on about $33b in cash. So why raise debt anyway? Possibly for two reasons:</p><ol> <li data-xf-list-type="ol">Biden's proposal to increase corporate taxes (discussed here). One advantage for debt is that interest payments on the debt are tax deductible, meaning that the overall amount taxable under the higher tax rates then reduces.</li> <li data-xf-list-type="ol">There seems to be quite a bit of concern over inflation at the moment. Inflation or the risk of inflation generally causes investor demand for bonds to drop, because there is a risk that the interest rate on the bonds cannot account for the increase in prices. From the company/issuer's perspective, the debt raised could be a good way to invest in long term fixed assets whose value would not necessarily corrode as pure cash would with the increase in inflation.</li> </ol><p>Which brings me to my final point, it's going to be interesting to see what Amazon uses this additional cash to invest in. Last week we saw the $8b purchase of MGM studios by Amazon, possibly Amazon's ticket into developing a strong streaming service that rivals Netflix (interestingly enough it outbid other bidders by $3bn). Other successful ventures into new industries include the AmazonGo grocery chain. Looking forward to seeing what other industries the tech giant makes an entry into (apparently<a href="https://www.power-technology.com/news/amazon-announces-renewable-energy-project-investments/" target="_blank"> renewable energy</a> and clean transport are on the table)</p><p></p><p>On a side and completely unrelated note: The <a href="https://theintercept.com/2021/05/25/jeff-bezos-blue-origin-senate-bailout/" target="_blank">US Senate</a> is set to debate whether Jeff Bezos's Blue Origin should be awarded an <a href="https://www.geekwire.com/2021/senators-spar-idea-giving-billions-jeff-bezos-blue-origin-venture-lunar-lander-program/" target="_blank">additional $10b NASA</a> contract (effectively a bailout) - the original contract was won by SpaceX (Elon Musk's brainchild). Just thought the irony of a bailout for anything Bezos owns is well, interesting to say the least.</p></blockquote><p></p>
[QUOTE="Dheepa, post: 79598, member: 1572"] What's really interesting to me about this bond issuance is the fact that Amazon technically doesn't need this money. According to the FT, the company is apparently sitting on about $33b in cash. So why raise debt anyway? Possibly for two reasons: [LIST=1] [*]Biden's proposal to increase corporate taxes (discussed here). One advantage for debt is that interest payments on the debt are tax deductible, meaning that the overall amount taxable under the higher tax rates then reduces. [*]There seems to be quite a bit of concern over inflation at the moment. Inflation or the risk of inflation generally causes investor demand for bonds to drop, because there is a risk that the interest rate on the bonds cannot account for the increase in prices. From the company/issuer's perspective, the debt raised could be a good way to invest in long term fixed assets whose value would not necessarily corrode as pure cash would with the increase in inflation. [/LIST] Which brings me to my final point, it's going to be interesting to see what Amazon uses this additional cash to invest in. Last week we saw the $8b purchase of MGM studios by Amazon, possibly Amazon's ticket into developing a strong streaming service that rivals Netflix (interestingly enough it outbid other bidders by $3bn). Other successful ventures into new industries include the AmazonGo grocery chain. Looking forward to seeing what other industries the tech giant makes an entry into (apparently[URL='https://www.power-technology.com/news/amazon-announces-renewable-energy-project-investments/'] renewable energy[/URL] and clean transport are on the table) On a side and completely unrelated note: The [URL='https://theintercept.com/2021/05/25/jeff-bezos-blue-origin-senate-bailout/']US Senate[/URL] is set to debate whether Jeff Bezos's Blue Origin should be awarded an [URL='https://www.geekwire.com/2021/senators-spar-idea-giving-billions-jeff-bezos-blue-origin-venture-lunar-lander-program/']additional $10b NASA[/URL] contract (effectively a bailout) - the original contract was won by SpaceX (Elon Musk's brainchild). Just thought the irony of a bailout for anything Bezos owns is well, interesting to say the least. [/QUOTE]
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