Fast take:
- Meta Platforms has issued its very first bond supply.
- The company intends to use the cash for capital expenditures, share buybacks, acquisitions, or investments.
- Facebook’s parents have been heavily investing in the metaverse, albeit they have not disclosed a target sum.
Meta Platforms Inc., the parent company of Facebook, has issued its first-ever bond. The global social media conglomerate did not specify the amount it aims to raise through the bond offering.
The company stated that the cash may be used for capital expenditures, share repurchases, acquisitions, or investments. This ultimate use-case is important due to Meta’s extensive investments in the metaverse. In actuality, the company renamed from Facebook to Facebook in October in order to take a new direction, which it defined as focusing on developing the future of human connections.
In the fourth quarter of 2021, Meta invested $10 billion in the metaverse, which had a significant impact on their net income. And in May, Zuckerberg forewarned investors of additional suffering, as the leading social media company anticipated spending more cash to achieve its metaverse objectives.
The metaverse is typically described as a 3D digital space where individuals can collaborate and engage in experiential activities such as gaming and digital live performances. Meta’s huge wager on the transaction has drained its finances.
This will likely be the first debt recorded by Meta. It is the only mega-tech company in the United States that has never used debt financing. Nonetheless, this shift appeared inevitable after consecutive quarters of falling backside line.
The company’s most recent quarterly results failed to meet analyst forecasts for revenue and earnings, resulting in a significant decrease in stock price. Last week, Meta revealed its first quarterly revenue loss, indicating a slowdown in business.
The company reported $4.45 billion in free cash flow for the quarter ending June 30. This represents a significant decline in the company’s cash reserves. This compares to $8.51 billion for the same quarter last year and $8.53 billion for the quarter ending March 31, 2022.
The announced share repurchases may assist in restoring the value, albeit this is likely to have a short-term effect as the company views this as a long-term capital reallocation initiative.
The Federal Trade Commission (FTC) has filed an antitrust action against Meta’s ambitions to acquire virtual reality company Inside out of concern that the technology giant could create a monopoly in the developing new sector, the metaverse.
McKinsey recently anticipated that the value of the metaverse would reach $5 trillion by 2030, whereas Citi had previously projected a range of $8 to $13 trillion.
