Reports indicate that Meta is gearing up to issue its first set of bonds, a strategic move aimed at financing new investments and bolstering its operational activities.
According to insights from two individuals reportedly knowledgeable about the deal, the company is set to secure a loan of $10 billion.
This significant financial step is intended to maintain a robust cash flow and to support funding for share repurchases. This development marks a notable move for Meta in its ongoing financial and strategic planning.
Meta Will Issue Bonds to Finance New Investments!
Meta, a pioneer in integrating the Metaverse into its core business model, is planning to issue $10 billion in bonds.
This move is a part of the company’s strategy to continue financing its operations and maintain a robust free cash flow. According to individuals close to the deal, this will be the tech giant’s first venture into such a debt offering, slated to occur soon.
Investors have shown substantial interest, offering $30 billion to support this initiative. The bonds will vary in maturity, ranging from 5 to 40 years, with the majority of demand anticipated for the 40-year bonds.
This proposal has been in the works for the last two months. Meta’s decision to launch this venture was influenced by its latest earnings report published in July.
The company has received an ‘A1’ rating from Moody’s and an ‘AA-‘ grade from S&P, with a ‘stable’ outlook from these institutions.
The bond issuance is a response to the recent contraction in Meta’s free cash flow. A year ago, the company reported $8.51 billion, but it has since dropped to $4.45 billion.
The bond offering is expected to provide some financial relief for Meta’s Metaverse initiatives, offering more leeway in funding its operations. The Metaverse project has been a significant investment for Meta, particularly in terms of research and development expenses.
In its latest earnings call, the company revealed that its Metaverse unit, Reality Labs, generated over $400 million in sales but incurred a loss of more than $2.8 billion in the second quarter of 2022.
Despite continued losses in the third quarter, Meta is determined to drive the VR industry forward. As part of this commitment, the company has been reevaluating the pricing strategy for its flagship VR headset, Quest 2, to achieve a balance between continued investment and fiscal responsibility.
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