Facebook-parent Meta Platforms, for the first time, has raised funds by issuing corporate bonds. Along with other corporate purposes, the funds may be used for share-buy back as well. Reportedly, the offering, which included bonds with maturities ranging from five years to 40 years, received over $30 billion of orders from investors, and the social media behemoth Meta Platforms Inc. taking advantage of the relatively strong demand to sell its first-ever corporate bond deal, offered $10 billion of securities.
The Meta’s borrowing program come at a time when the stock price is sliding and the cash position is dwindling. Meta recently reported its first year-over-year quarterly revenue decline, citing uncertainty in the digital advertising market, which has driven its growth for years.
Many of Meta’s large peers in the technology industry have borrowed heavily at low rates despite large cash piles. Including Meta, there are just 18 companies in the S&P 500 without outstanding short or long-term debt, excluding lease liabilities, as of the most recent quarter, according to data compiled by Bloomberg.
On August 4, 2022, Meta Platforms commenced an offering of senior unsecured notes from qualified institutional buyers, both within and from outside the United States. As per the Filings, the timing of pricing and terms of the Notes are subject to market conditions and other factors.
Meta intends to use the net proceeds from the offering for general corporate purposes, which may include, but are not limited to, capital expenditures, repurchases of outstanding shares of its common stock, acquisitions, or investments.
The Notes will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
S&P Global Ratings has assigned Meta a AA- investment-grade rating, while Moody’s Investors Service gave the tech giant an A1 rating, the equivalent of one step lower. Morgan Stanley, JPMorgan Chase & Co., Bank of America Corp. and Barclays Plc are the managers of the issue.
Of late, interest rates have increased after Fed raised the policy rates in order to tame rising inflation. The bond market seems to have much more active in the rising interest rate scenario.
(With inputs from agencies)