(San Francisco) Meta (Facebook, Instagram), seeking funding, will issue a loan for the first time in its history, a sign that the social media giant lacks funds to finance its short and long-term ambitions.
Posted on August 4
The Californian group will issue bonds, according to a document it filed Thursday with the SEC, the American stock market watchdog.
“Meta intends to use the proceeds of the loan for general purposes, which may include […] capital expenditure, share buybacks, acquisitions or investments”, specifies the group of Mark Zuckerberg.
It does not indicate the amount of funds it wishes to raise, nor the duration of the bonds.
According to the Bloomberg news agency, Meta is seeking between 8 and 10 billion dollars. The sum would be divided into four loans, and the longest would be for 40 years, with interest 1.8 percentage points higher than that of US Treasury bonds.
Last week, Meta released disappointing financial results: its quarterly revenue fell for the first time in its history, and its net profit fell 36% year-on-year to $6.7 billion.
The social network, the world’s number two in advertising, is facing budget cuts from advertisers, due to the poor economic climate, and competition from other platforms such as TikTok, which is very popular among young people.
“The situation looks worse than three months ago,” Mark Zuckerberg recently acknowledged during a conference call with analysts.
Issuing bonds is a “good idea”, according to analyst Dan Ives of Wedbush Securities. “They should have done it a long time ago.”
“Unlike other big tech players, Meta has no debt. The company is going to implement its strategy on the metaverse, aggressively, and it requires a lot of capital,” he told AFP.
Last fall, Facebook renamed itself Meta with the stated ambition of building the “metaverse”, a parallel universe accessible in augmented and virtual reality (AR and VR), presented as the future of the internet.
But since early February, its share price has halved. Over $400 billion in market capitalization went up in smoke.
“We are focused on long-term investments that will allow us to emerge stronger from this economic slowdown, starting with the recommendation algorithm and the “Reels” (formats that imitate those of TikTok, editor’s note), our new infrastructure advertising and the metaverse,” said Mark Zuckerberg.
It has also planned to reduce the pace of hiring, like many companies in the sector.
When questioned, the group declined to comment on the bond issue.
On Wall Street, the title which concluded up 1.05% Thursday at 170.57 dollars, fell 0.16% in electronic trading after the close.