Meta is Planning to Issue Bonds worth USD 10 Billion
The social
media company, Meta, is planning to issue its first set of bonds to finance new
investments and operations. The company will be selling USD 10 billion in debt
to maintain a healthy cash flow and fund buybacks, as per the statements of
people privy to the deal.
Bonds to Finance New Investments
As one of the
first companies to invest in the metaverse as part of its main business model,
Meta is set to issue debt bonds for funding its operations to
maintain a healthy cash flow. Reports from reliable sources reveal that
the company will be issuing USD 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 on Thursday, has received an overwhelming
response, with investors offering USD 30 billion. The bonds will have different
periods of maturity, varying from five years to 40 years. However, the majority
of the demand seems to be for a longer tenure.
The proposal
has been in the offing 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, an "AA" rating, and a "stable" outlook from
S&P.
An Expensive, Metaverse Move
The bond
issue is linked to the limitations of free cash flow that the company has
experienced during the last year. Meta had USD 4.45 billion in free cash flow,
down from USD 8.51 billion the previous year. Sources reveal that the bond
offering has the larger objective of giving the company more breathing space to
keep funding part of its operations, including its metaverse initiatives.
The metaverse
pursuit is costing the company a huge investment in research and development.
The company recently reported that its metaverse unit, Reality Labs,
registered losses of more than USD 2.8 billion during Q2 2022, despite
achieving USD 400 million in sales. Predictions for Q3 are equally gloomy, with
the company's acknowledgment that Reality Labs would continue to lose money.
Meta has also
taken some decisions on the sales segment by raising the price of its
flagship VR headset, the Quest 2, by USD 100 to continue investing in moving
the VR industry forward for the long term.
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