Facebook-parent Meta will make its first-ever bond offering, at a time when the social media company is making massive investments to fund its virtual reality projects.
Meta is set to raise $10 billion in offering and said that it would use the proceeds for capital expenditures, share repurchases, acquisitions or investments. Meta is selling four tranches of bonds with maturities ranging from five years to 40 years.
The company received an ‘A1’ rating from Moody’s and an ‘AA- rating’ and a ‘stable’ outlook from S&P. Tapping the market now would give it more financial room as it tries to fund some expensive overhauls, including a bet on augmented and virtual reality technology, according to sources.
In the current market environment, it might also be a rare opportunity to launch a bond offering relatively cheaply. Corporate bonds have rebounded in the past month after a plunge earlier this year, as investors hoped the US Federal Reserve’s fight against inflation through rapid rate increases was starting to have some impact.
Meta’s bond issuance will come after the company issued a gloomy forecast and recorded its first-ever quarterly drop in revenue, with recession fears and competitive pressures weighing on its digital ads sales. Its free-cash-flow has been depleting as it charges ahead with its metaverse plans, which led to the change in its name to Meta from Facebook last year. In Q2, which ended June 30, Meta had $4.45 billion in free cash flow, compared with $8.51 billion a year ago.