Since March, five banks have failed because of problems in the financial sector, and Meta Platforms Inc. is the first mega-cap technology company to enter the US investment-grade bond market.
A person who knows about the situation says that the social media giant, which reported profits last week, wants to raise $7 billion in a five-part deal. According to the source, the 40-year security, which is the biggest part of the sale, might pay 215 basis points more than Treasury bonds.
As of Monday, eleven companies had already confirmed that they would offer bonds before the Federal Open Market Committee meeting and expected rate decision on Wednesday.
Last year, Meta sold $10 billion in company bonds for the first time. The parent company of Facebook plans to use the extra money to help pay for capital spending, buy back outstanding shares of its common stock, and make acquisitions or investments, said the source.
Even though advertising sales picked up in the first quarter, the company in Menlo Park, California, has spent the last few months cutting costs and reorganizing its staff. Even though the company has a good cash flow, Robert Schiffman of Bloomberg Intelligence thinks that the company is probably trying to get more money for future bond buybacks.
He wrote in a note, “After it boosted repurchase authorization by $40 billion in January, we envision shareholder returns will keep growing — similar to Alphabet and Apple — as free-cash-flow prospects improve,” he wrote in a note. “With initial price talk wide to peers, we perceive little credit risk and strong relative value out the curve.”
Content Source: Bloomberg.com
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