Meta Platforms Inc. could raise up to $10 billion from investors by selling corporate bonds, Bloomberg reported today.
Corporate bonds are a type of financial instrument that companies use to raise debt financing. Meta is reportedly one of the few companies on the S&P 500 stock index that haven’t yet issued corporate bonds.
According to Bloomberg’s sources, Meta could seek to raise between $8 billion and $10 billion from investors in up to four installments. The longest portion of the company’s bond offering is reportedly a 40-year security with a yield that could potentially be 1.75% to 1.8% higher than US Treasury bonds. Morgan Stanley, JPMorgan Chase, Bank of America and Barclays are said to be managing the offering.
The two largest credit rating agencies, S&P Global Ratings and Moody’s Investors Service, have reportedly issued AA- and A1 investment grade ratings to Meta, respectively. “The A1 issuer rating is based on Meta’s strong credit profile which reflects the leading global position of its platform brands in social networking, supported by its extensive user base,” Moody’s stated.
Meta’s move to issue corporate bonds comes a few days after the company reported its first-ever quarterly revenue drop. The company generated revenue of $28.82 billion in the second quarter, down from $29.08 billion a year ago. Meta said it expects sales to decline in the third quarter as well.
Meta had $40.49 billion worth of cash, cash equivalents and marketable securities as of June 30. That sum includes $24.32 billion available and authorized for share repurchases. Meta reportedly stated in a regulatory filing that proceeds from its bond sales could be used for additional share purchases, as well as for general corporate purposes including potential capital expenditures.
Meta invests billions of dollars per quarter in its Reality Labs division, which leads the company’s metaverse development efforts. The metaverse is envisioned as a future version of the internet that would include more augmented reality and virtual reality elements. Meta could potentially use a portion of the proceeds from its bond sale to increase investments in its Reality Labs division.
Thanks to the significant metaverse-related investments that it has made over recent years, Meta is a major player in the VR market. The company’s Oculus series of VR headsets is the most popular in its category. As part of its product roadmap, Meta reported plans to launch four new augmented and virtual reality devices through 2024.
Meta’s bond sale is the latest in a series of recent debt financing deals carried out by major tech firms. Intel Corp. and Apple Inc. have reportedly raised $5.5 billion and $6 billion, respectively, through bond sales earlier this week.
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