Meta raises $8.5 billion in second bond offering

Tech giant Meta Platform Inc. reported in a filing to the US Security Exchange Commission(SEC) that it had raised $8.5 billion in a bond offering that is divided into five parts. This second offering comes after a successful first last year, where Meta was able to raise $10 billion.

Meta’s Second Bond Offering

The corporation raised $1.5 billion, $1 billion, $1.75 billion, $2.50 billion, and $1.75 billion through notes with maturities in 2028, 2030, 2033, 2053, and 2063, respectively, according to the filing.

The parent company of Facebook, WhatsApp, and Instagram stated that the longest-term 40-year security in the bond issue may yield 192 basis points more than the benchmark Treasury, which is less than the initial expectation of 215 basis points.

Other 2028, 2030, 2033, and 2053 notes had spread of 95 bps, 120 bps, 135 bps, and 177 bps respectively, in comparison to the benchmark U.S. Treasury.

Meta was one of the 11 companies that announced bond offerings as issuers sought to sell debt ahead of the Federal Open Market Committee meeting and likely rate decision on Wednesday.

Other significant high-grade issuers were the Hershey Company, which sold $750 million in bonds, and Comcast Corp., which realized $5 billion in a four-part deal. In total, more than $22 billion was sold in bonds that day.

In the midst of the financial sector turbulence that has seen five banks fail since March, Meta Platforms Inc. became the first mega-cap technology company to access the US investment-grade bond market.

The size of the issuance following JPMorgan Chase & Co.’s rescue of First Republic Corp. contrasts with the primary market’s response to the banking crisis that started in March.

The crisis saw at least eight prospective issuers withdraw their interest just a few days after Silicon Valley Bank collapsed. Due to this, March’s issuance came in at roughly $100 billion, significantly less than estimates of $150 billion.

Last year, Meta issued its first-ever corporate bond offering for $10 billion at an issuance where Apple raised $5.5 billion and Intel raised $6 billion. The funds were intended to aid the company balance out its books and continue operations debt free seeing as it had just recorded its first-ever quarterly drop in revenue.

However, this time, Facebook’s parent company intends to use the additional funds to assist with financing capital expenditures, repurchasing shares of its common stock that are still outstanding, and acquisitions or investments.

Notably, Morgan Stanley, JPMorgan, Citigroup Global Markets (2028 Notes and 2033 Notes) and Bank of America Corp were the book-runners for Meta in this issuance.

Meta reports a profitable Q1

Last week, the Mark Zuckerberg-led business released its first-quarter 2023 financial results, and both profit and revenue exceeded forecasts. At the time, Zuckerberg remarked, “We had a good quarter and our community continues to grow. “

Zuckerberg added:

Our AI work is driving good results across our apps and business. We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision.

Even though the January-March quarter was better than expected, the social media company has spent the past several months cutting expenses through layoffs and other measures. In its third round of significant job cuts, the Menlo Park, California-based company was reportedly going to fire about 4,000 workers this week having cut almost 21,000 jobs in the last six months.

Even though the corporation boasts good cash flow, Robert Schiffman of Bloomberg Intelligence believes that the company is likely aiming to get additional cash for upcoming bond buybacks.

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