Would you consider purchasing a bond with a century-long maturity? Google has recently released such an option.

Alphabet's Century Bond: A Bold Move in Tech Finance

In February, Alphabet—the parent company of Google—captured attention by launching a 100-year bond. This means investors who purchase the bond will see repayment a full century from now.

Few individuals would be able to witness the bond's maturity, given the lengthy timeline. As Jason Moser, a senior investment analyst at The Motley Fool, remarked, "Neither you nor I will be here when these bonds reach their end."

By issuing this century-long bond, Alphabet signaled its confidence in lasting until 2126—a sentiment shared by the institutional investors, pension funds, and hedge funds that participated in the offering.

Demand for the bonds was nearly ten times their value, with bids totaling about $1.4 billion. The 100-year bond was part of a larger fundraising effort that brought in close to $32 billion within just one day.

Retail investors in the U.S. were unable to purchase these bonds, as they were issued in the UK with a minimum investment of 100,000 British pounds and a prospectus restricting sales to institutional buyers.

Despite generating annual revenues exceeding $400 billion, Alphabet is borrowing to fuel its ambitious investments in artificial intelligence. The company revealed plans for AI-related capital expenditures of $175 billion or more in 2026.

Alphabet, Google's parent, made waves by offering a bond that won't mature for 100 years.

What Motivates Alphabet to Issue a 100-Year Bond?

For Alphabet, a billion-dollar bond is a small sum compared to its market value of $3.8 trillion. However, experts believe the century bond carries symbolic weight.

Lawrence Gillum, chief fixed income strategist at LPL Financial, commented, "Google is essentially saying, 'We’re able to issue a 100-year bond because we have the stature to do so.' Not every company can make that claim."

This move reflects Alphabet’s confidence in its longevity within the rapidly evolving tech sector—a space where giants like Xerox, BlackBerry, and Motorola have faded over time.

Moser added, "They’re making a statement: 'We plan to be here a century from now.' As a Google shareholder, it’s reassuring."

Of course, issuing a century bond doesn’t guarantee the company’s survival for 100 years.

Such bonds are uncommon in corporate America, and even more so in technology. The last tech company to offer a 100-year bond was Motorola in 1997. Motorola, once a leader in mobile devices, declined with the advent of smartphones.

Motorola continues to operate and pay interest to its century bondholders, but its story serves as a warning about the unpredictability of the tech industry.

Historical Perspective: Century Bonds in Corporate America

IBM issued a 100-year bond in 1996. In the years that followed, the company lost ground in the PC market and eventually left the business.

Despite these challenges, IBM’s century bondholders have generally fared better than others.

Since 1990, at least 38 U.S. public companies have issued century bonds. Caleb Silver, editor in chief of Investopedia, notes that only 17 of those companies remain in operation.

You likely won’t be around when Alphabet’s 100-year bond matures, but the company still found eager buyers.

Why Do Investors Purchase 100-Year Bonds?

What drives insurance companies or pension funds to invest in bonds with such lengthy maturities?

• Century bonds typically offer higher yields. Alphabet’s bond pays an interest rate of 6.125%, which is notably higher than the 4% to 5% yields on U.S. Treasury bonds with 10-, 20-, or 30-year terms.
• According to Silver, investors are attracted to century bonds because of their generous returns.
• Hedge funds and pension funds use these bonds to secure steady, long-term income that aligns with their ongoing financial obligations.
• Silver explains, "There’s demand for these bonds. While they seem unusual, they’re not as rare as you might think."

Investors aren’t necessarily betting on Alphabet’s existence in 2126. John Canavan, lead analyst at Oxford Economics, says, "If you’re a pension fund or insurance company, you can reasonably expect Alphabet to be around for the next decade—and that’s sufficient."

If concerns about Alphabet’s future arise, bondholders can likely sell their bonds on the secondary market, though possibly at a reduced price.

Canavan adds, "There will always be someone willing to buy them. You won’t lose everything."

Even if Alphabet were to fail, bondholders would recover at least a portion of their investment through bankruptcy proceedings, according to Gillum. "There’s some level of protection, but it’s unlikely you’ll get back the full amount."

Adapted from USA TODAY: Google issued a 100-year bond. Here's how the market reacted.