Can Meta’s stock price grow faster than the interest rates it will be paying on its new bonds? Meta took on $8.5 billion in debt on Monday, selling a range of bonds ahead of a Federal Reserve meeting on Wednesday that is expected to raise interest rates.
It is only the second bond issue in Meta's history, after it raised $10 billion last year. According to the prospectus, Meta intends to use the funds “for general corporate purposes, which may include, but are not limited to, capital expenditures, repurchases of outstanding shares of our common stock, acquisitions, or investments.”
Despite high and rising interest rates, Meta was able to secure the cash for its bonds relatively inexpensively, with yields 192 basis points above Treasuries, which was “less than initial discussions for about 215 basis points,” according to Bloomberg. The five notes have five different durations; they’ll be paying between 4.6% for their five-year bonds and 5.75% for their 40-year bonds.
The issuance asserted a new corporate confidence in the bond markets after at least eight companies canceled their plans to sell bonds in March, amid the collapse of Silicon Valley Bank, per Bloomberg. Total issuances in March reached approximately $100 billion, rather than a projected $150 billion. Bloomberg described Meta’s bond issue as “the first mega-cap technology company to tap the US investment-grade bond market” since SVB’s collapse.
Other major issuers Monday included Hershey and Comcast, which sold $750 million and $5 billion in bonds, respectively.—SW
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