Meta Platforms Inc. (NASDAQ:META), one of the few S&P 500 businesses without debt, sold $10 billion in corporate bonds for the first time after its cash flow and stock price declined. According to a source very familiar with the situation, the social media giant’s bond sale was sold in four tranches. The yield on the longest tranche of the offering, 40-year security, is 1.65 % points over Treasuries, according to a person who asked not to be identified because the specifics are secret. Early in the afternoon in New York, demand peaked at more than $30 billion, according to a source familiar with the situation.
Depending on the firm’s health, the company’s position on borrowing may have changed. Meta has now reported its first quarterly revenue fall year-over-year, blaming unpredictability in the digital advertising market, which has powered its development for years. The parent company of Facebook and Instagram is concerned that youthful users are fleeing its platform in favor of TikTok from ByteDance Ltd. Mark Zuckerberg, Facebook’s chief executive officer envisions that humans will interact, work, and shop in the future within the Metaverse, an immersive virtual reality world.
Stock Buybacks
The proceeds from the bonds’ sales may be used for capital expenditures, stock repurchases, acquisitions, or investments. According to Bloomberg Intelligence analysts Mandeep Singh and Ashley Kim, the company is more likely to utilize the funds to dramatically increase its share repurchases and to hire and keep bright personnel than to increase expenditures on Metaverse investments.
Meta (NASDAQ:META) has been using cash to repurchase shares, including $5.1 billion in the second quarter of this year, and has $24.3 billion available for buybacks as of June 30, according to its most recent financial report. Its stock price has more than halved from its September high to $168.80 as of Wednesday’s market close, making repurchases more affordable. And even with the issuance of a vast deal, leverage would remain below 1x in 2022, BI analyst Robert Schiffman stated in a research note.
According to figures published by Bloomberg, its cash reserves have decreased by $23.6 billion over the past year. This is one of the most significant cash losses experienced by non-financial S&P 500 companies during the time. Despite substantial cash reserves, many of Meta’s large technology industry competitors have borrowed heavily at cheap interest rates. As of the most recent quarter, according to statistics provided by Bloomberg, only 18 S&P 500 firms, including Meta, are without outstanding short- or long-term debt, excluding lease liabilities.
Other technology giants, like Apple Inc. (NASDAQ:AAPL) and Intel Corp. (NASDAQ:INTC), have leveraged the rise of the credit market over the past month to sell debt. The corporations are taking advantage of the market’s moment of relative stability as a result of yields that have been drifting downwards after rising throughout the year.
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