The Federal Reserve feels raising interest rates too soon could choke off the recovery. But if you’ve been paying attention to what cheap money has wrought, you might wish the Fed could move faster. Take the recent spate of money-raisings by a select group of tech companies, which has fueled less-than-productive spending on stock buybacks and bitcoin-buying splurges. Those kinds of investments do nothing for the businesses’ long term prospects.
Today’s example is Silver Lake’s $1 billion convertible note investment in data analytics firm Splunk, which expects to use the proceeds “to fund growth initiatives and manage its capital structure.” That includes a billion dollar stock buyback, also announced today. Indeed, Splunk doesn’t need to raise more money for its growth plans, which involve a costly but necessary transition to a cloud-based service: it had $1.8 billion of cash on hand at the end of April.