Meta resolves to go into debt, and launches a bond loan of 10 billion dollars

Meta out of cash? The company, particularly known for its social networks Facebook and Instagram, is looking for fresh money. For this, Meta will issue bonds, according to a document filed Thursday, August 4, 2022 with the SEC, the American stock market policeman. Meta is looking to raise $10 billion in its first-ever bond issue, Bloomberg said. Other tech giants like Apple and Intel also issued bonds this week, raising $5.5 billion and $6 billion, respectively.

Share buybacks and investments

Meta’s bond issue is in four tranches, the longest term of which is 40 years. It appears that Meta is looking to fund share buybacks and investments to revamp its business.

If Meta is one of the few companies in the S&P 500 not to have debt on its balance sheet, the company presented a turnover down 1% in the second quarter of the year. A first since its IPO in 2007. The social network has highlighted a decline in the online advertising market: overall this sector continues to grow but at a slower pace than in 2021. Above all, Meta is losing advertising market share on social networks, to the benefit of TikTok. Trends that are reflected in the average price of ads served by Meta, which fell 14% this quarter.

TikTok’s competition

In the background, TikTok seems above all to establish itself as a lasting rival for Meta, which fears that young people are deserting Facebook and Instagram in favor of the video-sharing application. Behind a possible loss of daily users, hide losses of advertising market share to the benefit of its rival.

In the United States, spending on influencer marketing is expected to increase by more than 12% this year and exceed the $4 billion mark, reports Insider Intelligence. By the end of 2023, spending on brand-influencer partnerships will have nearly doubled compared to 2019. Nearly 91% of US brands that use influencer marketing will invest more in video this year, proof that this format is gaining momentum. the extent. However, if Instagram remains the top influencer platform overall this year, TikTok is expected to overtake Instagram Reels in 2022.

Reels are a short form video format modeled after TikTok. Meta is pushing for this format to be widely used. At the same time, the company pushes content published by accounts not followed by the user. The goal is to more than double the percentage of such content in feeds by 2023. Currently, around 15% of content in Facebook users’ feed, and slightly more on Instagram, are pushed by its recommendation algorithm. Algorithm that requires investment.

The expensive metaverse

Finally, Meta has displayed great ambitions in the metaverse. This major project, unveiled by Mark Zuckerberg last October, requires a lot of investment before it can see the light of day. Meta has been well established in the world of virtual reality for several years with its Oculus headsets. But during the presentation of his metaverse project, Mark Zuckerberg seemed to want to go much further in order to create an immersive world where it would be possible to communicate, work and shop. The founder of Facebook sees virtual reality as the next computer revolution after the smartphone.

Before achieving such a result, Meta spends substantial sums. However, due to the drop in its advertising revenues, the group risks having to limit its expenses related to virtual and augmented reality, which were 3 billion dollars in the first quarter of 2022. This loan of 10 billion dollars is part of in this trajectory. This would give Meta more financial leeway to expand its costly initiatives as its cash flow dwindles.

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