Meta introduces for the first time in the bond market a huge deal worth 10 billion US dollars

Meta Platforms Inc. sells. Inc., one of the few companies with no debt in the S&P 500, received $10 billion in its first-ever corporate bond sale as cash flow and stock price plummeted.

The social media giant’s bond deal consists of four parts, according to a person familiar with the matter. The person, who asked not to be identified because details are private, said that, after initial discussions of 1.75 to 1.8 percentage points, the longest part of the offer, a 40-year security, would fetch 1.65 percentage points over Treasuries. Tariff bond orders reached more than $30 billion at their peak in the early afternoon in New York, according to a person familiar with the request.

The company’s position on borrowing may have changed with the state of its business. Meta just posted its first quarterly revenue decline year-over-year, citing uncertainty in the digital advertising market, which has driven its growth for years.

The father of Facebook and Instagram is concerned that young people are abandoning his TikTok platform of ByteDance Ltd. And it has big, costly ambitions to build a whole new version of the internet in the Metaverse, an immersive virtual reality world where CEO Mark Zuckerberg imagines we’ll connect, work and shop in the future.

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Proceeds from the sale of bonds may be used for purposes including capital expenditures, stock buybacks, and acquisitions or investments. The company may be more likely to use the money to significantly boost its share buybacks, and hire and retain talented employees, rather than spend more on Metaverse investments, according to Bloomberg Intelligence analysts Mandeep Singh and Ashley Kim.

Meta is using cash to buy back shares, including $5.1 billion in the second quarter of this year, and had $24.3 billion available for repurchases as of June 30, according to its earnings release last week. Its share price has more than halved from its September high to $168.80 as of the market close on Wednesday, making buybacks cheaper. Even with the issuance of a mega deal, the leverage will remain below 1x, based on the 2022 Ebitda consensus, BI analyst Robert Schiffman wrote in a note.

Its cash stock is down $23.6 billion from the previous year, according to data compiled by Bloomberg. This is among the largest cash losses for non-financial S&P 500 companies during this period.

Many of the big Meta peers in the tech industry have borrowed heavily at low rates despite the large cash piles. Including Meta, there are only 18 companies in the S&P 500 with no outstanding short or long-term debt, excluding lease commitments, as of last quarter, according to data compiled by Bloomberg.

Over the past month, other tech companies, including Apple Inc. and Intel Corp, by storming the credit markets to sell debt. Companies benefit from returns that have drifted lower after a year-long rally, providing a moment of relative stability in the market.

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S&P Global Ratings assigned the investment rating to Meta-AA-, while Moody’s Investors Service gave the tech giant an A1 rating, which equates to a step lower.

“The issuer’s A1 rating is based on a strong Meta credit profile that reflects the leading global position of its social networking platform, backed by a broad user base,” Moody’s said in a report.

It is managed by Morgan Stanley and JPMorgan Chase & Co. and Bank of America Corp. Barclays Plc will sell the bonds on Thursday. Meta and banks made a series of calls from fixed-income investors on Wednesday to market the sale.

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