Meta’s First-Ever Corporate Bond Deal Sees $30 Billion Request Despite Zuckerberg’s Grim Warning

Corporate bond investors appeared quite bullish on the metaverse on Thursday, or at least on digital advertising.

Meta Platforms Inc., META,
Facebook’s parent company saw a request for about $30 billion on Thursday for its first $10 billion, four-part U.S. corporate bond deal, according to a person with knowledge of the deals and Informa Global Markets.

It’s a big problem. While Meta announced its first-ever revenue drop in the second quarter, investment bankers were still able to discuss the prices of each class of the social media giant’s A1 to AA-rated bonds.

This has almost ensured that Meta, which also has Instagram and What’s App under its umbrella, secures cheaper debt than what was on offer only a few hours ago.

Meta did not immediately respond to a request for comment.

Specifically, prices for the company’s five-year class were expected to be 75 basis points above the Treasury’s risk-free rate, down from an initial range of 90 basis points, according to Informa Global Markets.

The 10-year class was expected to be 115 basis points above the TMUBMUSD10Y,
reference. That would represent a premium to the roughly 86 basis point spread on similar 3.6% coupon bonds traded Thursday by retail giant Amazon, according to data from BondCliq.

Early last week, Facebook’s parent company reported second-quarter earnings of $6.69 billion, or $2.46 per share, from $3.61 per share last year, on sales $28.82 billion, compared to $29.08 billion a year ago.

“We appear to have entered an economic downturn that will have a significant impact on the digital advertising industry,” Meta Chief Executive Mark Zuckerberg said on a conference call after the earnings release.

Not everyone felt so bullish about the new Meta Bond deal. “While Meta has built a massive app ecosystem and is investing heavily in the Metaverse for the future (which may or may not succeed), we don’t believe the company’s economic moat is as wide as Amazon’s. “, CreditSights analysts wrote on Thursday, about the bond issue.

The team said it sees difficulty with a social media platform trying to “replicate Amazon’s AMZN,
e-commerce/logistics or cloud computing business.

“We’re not saying Meta will follow Myspace’s path, although we believe its business is relatively more vulnerable to new entrants and changing user preferences.”

Meta shares rose 0.8% on Thursday, but still down 49% on the year so far, according to FactSet.

Related: What is the “metaverse” and how much will it be worth? Depends on who you ask

About Myra R.

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