Sources say that Meta, a company that runs a social networking site, plans to put out its first set of bonds to pay for more investments and operations. Two people who say they know about the deal say that the company will sell $10 billion in debt to keep a steady cash flow and pay for buybacks.
Meta is going to sell bonds to pay for new investments
Meta was one of the first companies to use the metaverse as a core part of its business model. It plans to issue debt to pay for some of its operations while keeping a steady flow of free cash. Sources close to the deal say that the company will sell $10 billion worth of bonds as part of its first debt issuance of this kind.
The operation, which was set to happen on Thursday, got a lot of attention, and investors offered $30 billion to make money off of it. The bonds will have terms that range from 5 to 40 years, with the 40-year bonds getting most of the interest.
Sources say that the offering has been in the works for the past two months, but Meta didn’t want to announce it until after its most recent financial report came out in July. Several agencies gave the company good ratings, such as a “A1” rating from Moody’s and a “AA-” rating with a “stable” outlook from S&P.
A Pricey Move in the Metaverse
The company’s free cash flow has gone down over the last year, which is why this bond is being given out. Last year, Meta had $8.51 billion in free cash flow. This year, it only had $4.45 billion. Sources say that the bond offering will give the company more breathing room to keep funding some of its operations, such as its metaverse projects.
Meta’s push into the metaverse costs the company a lot of money in R&D. In its most recent earnings call, the company said that in the second quarter of 2022, its subsidiary Reality Labs made more than $400 million in sales but lost more than $2.8 billion. The company admits that Reality Labs will continue to lose money in Q3, which is also not a good sign.
Meta has raised the price of its best-selling VR headset, the Quest 2, by $100 “so that we can continue to invest in moving the VR industry forward over the long term.”