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As global events continue to affect how customers spend their money in 2023, Amazon has taken out an $8 billion loan to anticipate market headwinds.
The loan (opens in new tab)active as of January 3, 2023, has been provided by a consortium including Singapore’s DBS Bank and Japan’s Mizuho Bank, which the company says will be used to strengthen Amazon’s financial position and cushion against potential economic downturns .
The revelation is likely to come as a surprise to customers and colleagues alike, as Amazon has largely performed well in the recent times of economic uncertainty due to the coronavirus pandemic, thanks to a surge in e-commerce.
Amazon borrows $8 billion
However, the company has faced growing criticism in recent years for its business practices and dominance in the e-commerce market, which could be an indication that the loan could be a precautionary measure in the face of potential regulatory action. Similar legal action has already been taken against Microsoft, which is selling its video conferencing platform Teams too cheaply, pricing rivals out of the market, Slack said.
Despite its global dominance, it seems that even Amazon is apprehensive about what the future holds. In an email to TechCrunch (opens in new tab)a company spokesperson said:
“Given the uncertain macroeconomic environment, we have used a variety of financing options in recent months to support capital expenditures, debt service, acquisitions and working capital needs.”
The loan, which has a term of 364 days, received mixed reactions. Some have praised Amazon for its proactive approach to potential economic challenges, while others have expressed concerns about the company’s reliance on debt.
The 0.75% interest rate would be increased to 1.05% if the company decided to extend its loan for an additional 364 days, further adding to the estimated $932 million in debt interest expenditure in the first nine months from 2022.
Despite speculated cuts that could put 10,000 jobs at risk and cuts in many services, Amazon’s market cap is estimated to have fallen to around $875 billion, after peaking at $1.88 trillion in July 2021.