According to reports, Meta, the social media platform, plans to issue its first bond set to fund new operations and investments. According to statements made by two sources with knowledge about the transaction, Meta plans on selling $10 billion worth of debt in order to keep a healthy cashflow and finance buybacks.
Meta to Issue Bonds for New Investments
Meta was one of the original companies to pivot to the metaverse in its business model. Now, the company is planning to issue debt to finance part of its operations as well as to keep a healthy cash flow. People close to the transaction claim that the bond issue will amount to $10 billion. This is the first such debt offering for the tech company.
This operation was due to be completed Thursday. Investors have offered $30 billion in order to profit from it. There will be different maturities for the bonds, ranging from 5 years up to 40 years. The majority of demand is directed toward the latter.
Source statements indicate that the offering was in development for two months. Meta decided to make it public after publishing the July earnings reports. The company obtained satisfactory ratings from different agencies, getting an ‘A1’ rating from Moody’s and an ‘AA- rating’ and a ‘stable’ outlook from S&P.
A Expensive Move in Meta
This bond was issued because of the decrease in free cash flow the company experienced over the past year. Meta generated $4.45 billion of free cash flow last year, as opposed to $8.51 trillion a year prior. Sources indicate that the bonds offering will give Meta more cash flow to continue funding some of its operations including the metaverse initiative.
Meta’s metaverse push is costing the company a lot of funds in research and development. According to the company’s most recent earnings call, Reality Labs (its metaverse unit), had reported that it has made sales in excess of $400 million and suffered losses in the second quarter of 2022. The company also acknowledged that Reality Labs will continue to lose money in Q3.
Meta also has made moves in the area of sales. raising the price of its flagship VR headset, the Quest 2, by $100 “in order to continue investing in moving the VR industry forward for the long term.”
What do you think about Meta’s $10 billion bond issuance? Comment below
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