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Snapchat parent company Snap announced today that it will be issuing $1 billion worth of convertible senior notes that will come due in 2026 through what's called "private placement", which is a direct offering to institutional buyers.

The news comes just a few months after the company's Snapchat app posted its strongest user growth in a few years which coincided with its big push into video games and AR.

Snap to use the cash to advance its AR features as well as possible future acquisitions

Snap(NYSE:SNAP) has had a notoriously bad cash burn rate since going public. It raised around $2.4b during its IPO, and a year later it had burned through all but $400 million of those funds. Snap's stock price plummeted to as much as 80 percent down from its listing date.

User engagement was looking extremely poor for a long time until earlier this April the app announced positive growth numbers in terms of average daily users. The company reported in its Q2 earnings that 13 million DAU's had been added bringing the total over 200 million.

Wall Street seemed to be back on board with share prices surging after earnings by as much as 15 percent. The once-dominant app that ushered in the concept of video "stories" to the world saw share prices briefly creeping up past IPO levels for the very first time.

Now Snap is looking to raise an additional billion dollars as it seeks to diversify itself from competitors such as Facebook's (NASDAQ:FB) Instagram, which copied Snap's Stories features down to the tiny details.

Snap intends to use the net proceeds from the offering for general corporate purposes, including working capital, operating expenses, capital expenditures, and to pay the cost of the capped call transactions described below. Snap may also use a portion of the net proceeds to acquire complementary businesses, products, services, or technologies or for repurchases of Snap's common stock, although it has no commitments for any material acquisitions or stock repurchases at this time.

-Snap Inc press release announcing the cash raise

It's unclear what acquisitions the Snap executive management team might be looking into, but it's meaningful that acquisitions are called out in the press release. Snap is really attempting to push more into augmented reality and unique games that friends can play quickly with one another so a potential purchase of another company would probably support this strategy.

Snap CEO Spiegel said the current low-interest-rate environment gives the company a good opportunity to go ahead with the move. According to the chief executive, the company expects the fundraising to close later this week.

It's interesting to see the company forced to raise cash so soon after its IPO. While not unprecedented, the company already has a bad reputation for cash burn and coupled with its historical struggles with retaining users it might raise some eyebrows among investors. The company is fresh-off an excellent quarter, so the timing is certainly right for a move like this, no doubt helped in part by super low-interest rates.