According to reports, social media company Meta is planning its first bond issue to finance new investments and operations. The company plans to sell $10 billion in bonds to maintain healthy cash flow and fund share buybacks, according to two people reportedly familiar with the deal.
Meta will issue bonds to finance new investments
Meta, one of the first companies to pivot part of its primary business model to the Metaverse, will issue debt to fund part of its operations and to continue to maintain healthy free cash flow. According to a reportfrom a person close to the deal, the company will issue $10 billion in debt as part of the first bond issue of its kind for a technology giant.
The operation, which was scheduled to take place on Thursday, has generated a huge response, with investors offering $30 billion to take advantage of the move. The bonds will have different maturities ranging from 5 to 40 years, but most of the demand is directed toward the latter.
The offering has been underway for the last two months and Meta decided to launch it after it released its latest earnings report in July, according to the source’s description. The company received satisfactory ratings from different agencies, with an “A1” from Moody’s and an “AA-” and “stable” outlook from S&P.
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The bond issue comes as the company has been experiencing a related to the free cash flow contraction experienced. Meta’s free cash flow was $4.45 billion, compared to $8.51 billion a year ago. According to sources, the bond issue is intended to give the company more breathing room to continue funding some of its operations, including the Metaverse initiative.
Meta’s Metaverse promotion has cost the company a lot of money in research and development. In its latest earnings report, the company reported that its metaverse division, Reality Labs, reached sales of more than $400 million, but reported a loss of more than $2.8 billion in the second quarter of 2022. Forecasts were not good, and the company admitted that Reality Labs will continue to lose money during the third quarter.
Meta also made some moves on the sales front, raising the price of itsflagship VR headset, Quest 2, by $100to “continue to invest in advancing the VR industry for the long term.”
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