Microsoft Seeks $2.25 Convertible Raise

Could this Be the Beginning of a Corporate Finance Trend?

June 10, 2010 - Surprisingly Microsoft Corp., not exactly a cash-poor company,  is seeking to raise $1.15 billion of convertible notes.  Many see this as helping the U.S. stock markets to recover from a two month or so corporate finance and investment banking slump.  During May funds raised in the United States through sales of convertible debt or convertible preferred dropped over 40% to slightly under $2.25 billion from a high earlier this year of close to $4 billion.

The typical strategy by hedge funds and other private equity investors is to buy convertible securities including convertible debt and convertible preferred stock and then short the underlying shares seeking to obtain a profit.  With a company that is as widely held as Microsoft, this more than likely is not a possibility.

But with all the cash sitting on the sidelines and with the United States and the U.S. dollar be  viewed as  safe havens by investors worldwide this Microsoft convertible offering may initiate a trend consisting of an increasing number of companies with strong balance sheets taking advantage of the cash on the sidelines and the “flight to safety.”