TL;DR

Market reports indicate that Oracle is advancing a $20 billion equity and bond financing round, reaching the maximum funding limit promised for the investment day.

The spread on new bonds and credit default swaps shows that investment-grade ratings and pricing near junk bond levels have diverged.

· Underlying assets: ORCL and its newly issued bonds and CDS, bond issuance windows for Microsoft/Meta/Google, CoreWeave.

On November 2, market reports indicated that Oracle is advancing a $20 billion equity and debt financing plan, aiming to issue $10 billion in common stock and $10 billion in senior notes, fully utilizing the financing cap committed on investment day for fiscal years 2027 through 2030. The company’s stock closed down 8.76% that day, erasing all of its more than 10% gain from investment day.

The loan itself was not surprising. What has unsettled the market is the price.

Used up 20 billion in five days, stock price fell back to its starting point

Two separate offerings of $10 billion each are being advanced on the same day, with purposes listed quite broadly: capital expenditures, debt repayment, investments and acquisitions, dividends, and share repurchases. This means the $20 billion cannot be fully attributed to AI spending, but it does cover the most costly segment of data center development.

The stock price reaction is more direct than the financing structure. Market data shows that the stock closed at $130.67 last Friday and $119.22 on Monday, a single-day decline of 8.76%, with a cumulative drop of approximately 18% over the three trading days through November 2. The double-digit positive candle on the investment day was completely erased by a single negative candle, expanding the year-to-date loss to approximately 33%.

Baird analyst Rob Oliver believes this issuance is entirely consistent with the structure disclosed on Investment Day, and he doesn’t understand why the market is panicking. This argument holds true at the level of “whether there is new information,” as the amount, timing, and instruments were all disclosed five days ago.

But the market has already written the answer in the price. The same structure, sold with different spreads and discounts, results in entirely different financing costs. The sell-off reflects how expensive this sale was.

The rating is still investment grade, but the price has reached the doorstep of junk bond territory.

First, clarify a commonly confused point: rating agencies and the bond market are not referring to the same thing. Moody’s assigns Oracle a Baa2 rating with a negative outlook, while S&P and Fitch assign it BBB—all still within the investment-grade range. However, the compensation demanded by bond buyers is determined by a different set of criteria.

According to market quotes, the spread of the new bonds over comparable U.S. Treasuries is approximately 240 to 335 basis points, with the longest-duration coupon quoted above 8.6%. The five-year credit default swap, representing the cost of insuring against bond default, is around 292 basis points, up approximately 265% over the past year.

The five-year CDS is approximately five times that of Microsoft.

Viewed horizontally, the yield on Oracle’s bonds maturing in 2026 is approximately 8.4%, while Apple and Microsoft bonds with similar durations are around 6.1%. Even though all are classified as investment-grade, the cost of borrowing differs by more than two percentage points.

Oracle's long-term bond yields are higher than those of peers.

According to credit research firm CreditSights, Oracle’s new bonds are trading in the secondary market like BB-rated bonds—the higher end of the junk bond spectrum. The firm also believes this is the final public bond issuance for capital expenditures over the coming years. The first part reflects current pricing; the second is a forward-looking prediction.

The cap locks the open market but not off-balance-sheet activities.

On Investment Day, the company defined $20 billion as its final public market financing in this cycle. According to the company’s plan, growth starting in fiscal year 2029 will be funded internally, with net debt-to-adjusted EBITDA reduced to below 3.5x.

The issue lies in the scope of this commitment. The $20 billion cap applies only to stocks and bonds in the public market and does not include refinancing of existing debt, nor does it automatically cover leases, supplier financing, or customer prepayments. The company’s disclosed口径 indicates that additional supplier financing liabilities will follow, and the bond terms contain no financial covenants or restrictions on further borrowing.

This explains why both interpretations coexist. UBS analyst Karl Keirstead previously viewed the cap as a缓解 for financing anxiety, while Dynasty’s Pat Nerney saw it as a narrative red line. If the company returns to the market in the second half of fiscal 2027, the notion of “the final一笔” would no longer hold.

The final payment must be self-verified by cash flow in fiscal year 2028.

Two numbers remain unresolved: the final offering price and number of shares have not been determined. Market rumors suggest a discount of approximately 11%, corresponding to around $116, but these are unconfirmed estimates during the pricing phase. Based on last Friday’s closing price of $130.67, $10 billion would equate to roughly 76.5 million shares, resulting in a dilution of about 2.5%. If the discount is confirmed, both the number of shares and the dilution percentage would be higher.

The other is free cash flow, which is the cash remaining after operating income minus capital expenditures. The company forecasts a positive free cash flow in the second half of fiscal year 2028 and at least $30 billion in fiscal year 2029. Until this trajectory is achieved, Oracle’s debt levels will continue to depend on its own stated timeline.

Free cash flow needs to turn positive to 30 billion over three years.

The debt口径 also requires attention. Beyond the $20 billion cap, leases, supplier financing, and customer prepayments are not subject to restrictions. It is the speed at which these liabilities can grow that serves as the stress test for the "final一笔" claim.

The cost of capital has been repriced. The additional interest on new debt, potential equity discounts, and credit default swaps that have risen by approximately 265% within a year collectively reflect the market’s valuation of Oracle’s AI infrastructure. Whether this valuation continues to rise depends on the final equity pricing, cash flows for fiscal year 2028, and how much additional debt can be added beyond the $20 billion cap.