Meta, the social media company, is planning to issue its
first set of bonds to finance new investments and operations, according
to reports. The company will be selling $10 billion in debt, to maintain
a healthy cash flow and fund buybacks, per statements of two people
with reported knowledge of the deal.
Meta to Issue Bonds to Finance New Investments
Meta, one of the first companies that pivoted to the metaverse as
part of its main business model, is set to issue debt in order to
continue to fund part of its operations and to maintain a healthy free
cash flow. According to reports
coming from people close to the deal, the company will be issuing $10
billion in bonds as part of the first debt offering of this kind for the
tech giant.
The operation, which was set to happen Thursday, has received a big
response, with investors offering $30 billion to take advantage of this
move. The bonds will have different maturities, going from five years to
40 years, with the majority of the demand being directed towards the
latter.
Per source statements, the offering has been in the works for the
last two months, with Meta deciding to launch it after releasing its
latest earnings report in July. 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.
An Expensive Metaverse Move
The issuance of this bond has to do with the shrinkage of the free
cash flow that the company has experienced during the last year. Meta
had $4.45 billion in free cash flow, compared to the $8.51 billion the
company had a year ago. Sources indicated that the bond offering will
have the objective of giving the company more breathing room to keep
funding part of its operations, including its metaverse initiatives.
Meta’s metaverse push is costing the company a lot of funds in
research and development. In its latest earnings call, the company reported
that its metaverse unit, Reality Labs, had reached sales of more than
$400 million, but registered losses of more than $2.8 billion during Q2
2022. Predictions are not good either, with the company acknowledging
that Reality Labs would continue to lose money during Q3.
Meta has also made some moves on the sales side of the equation, 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.”
