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

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 almost ensured that Meta, which also has Instagram and WhatsApp under its umbrella, could secure cheaper debt than was offered hours before.

Meta declined to comment beyond a public filing for the debt offering.

The price of the company’s five-year class was 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 reached 115 basis points above the TMUBMUSD10Y,
2.684%
reference. That’s a premium to the roughly 86 basis point spread on similar 3.6% coupon bonds traded Thursday by retail giant Amazon AMZN,
+2.19%,
according to BondCliq data.

Tech giant Apple Inc. AAPL,
-0.19%
raised $5.5 billion in the corporate bond market on Monday.

Early last week, Meta reported second-quarter earnings of $6.69 billion, or $2.46 per share, from $3.61 per share last year, on sales of 28.82. billion, up from $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,
+2.19%
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,” they wrote.

Meta shares rose 1.1% on Thursday but are still down 49% on the year so far, according to FactSet. The S&P 500 SPX index,
-0.08%
fell 0.1% on Thursday, the Dow Jones Industrial Average DJIA,
-0.26%
lost 0.3%, while the Nasdaq Composite Index COMP,
+0.41%
rose 0.4% as investors waited for Friday’s jobs report for any signs of weakness in the robust labor market, especially as tech jobs come under pressure.

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