Meta to float up to $25 billion in bonds Is the market ready to fund the AI race?

Meta Platforms, which owns social networks Facebook and Instagram and messenger WhatsApp, is preparing a bond offering for up to $25 billion, Bloomberg found out. According to its data, the offering has attracted a lot of interest, with investors submitting bids of almost $100 billion. At the same time, Meta's shares collapsed by 10% after a report in which it raised its forecast for annual expenses. The company is increasing investments in AI infrastructure, but cannot explain to investors how and when these expenditures will pay off.

Meta plans to sell investment-grade bonds worth $20 billion to $25 billion, Bloomberg reported, citing sources. According to the agency, investors have already made orders for about $96 bln.

The deal may include up to six tranches, says one of the agency's interlocutors. At the same time, the yield of the longest issue with maturity in 2066 may be about 1.47 percentage points higher than that of U.S. government bonds, although initially discussed 1.8 percentage points, the agency writes. The placement is being organized by investment banks Citigroup and Morgan Stanley. Citi declined to comment to Bloomberg, and Morgan Stanley and Meta did not respond to the agency's requests.

The placement follows the release of Meta's quarterly earnings: revenue beat expectations, but the company simultaneously raised its full-year capital expenditure guidance to a range of $125 billion to $145 billion, about 7% above the company's previous expectations. The change reflects accelerating investment in AI infrastructure across the sector, with major tech companies such as Amazon, Alphabet, Meta and Microsoft collectively planning to spend $725 billion, Bloomberg notes.

Meta shares fell by 10% in trading on April 30. The reason was the words of Meta CEO Mark Zuckerberg in a conversation with analysts after the report: he admitted that the company does not have a "very clear plan" for monetization of each AI product, Bloomberg reports.

The new offering comes six months after Meta offered $30 billion in bonds and received a then-record $125 billion in demand, Bloomberg recalls. Additionally, the company raised another $30 billion in off-balance sheet financing through a special purpose entity partnering with Blue Owl Capital.

Meta is acting in line with the general trend among major technology companies: Amazon placed $54 billion worth of bonds in March, Alphabet placed $32 billion worth in February, and Oracle placed $25 billion worth at a record demand of $129 billion.

Investors have so far actively agreed to buy securities of large AI companies. "The market was expecting in advance the offer from hyperscalers after the release of the statements, - quotes Bloomberg portfolio manager of Impax Asset Management Tony Trzinka. The analyst expects continued demand to buy bonds, but he believes investors are demanding concessions on price.

Meta securities have lost about 8% since the beginning of the year. For comparison, the US broad market index S&P 500 grew by 5% over the same period.

The average target price of Meta shares is $843, which implies growth of quotations by another 25% relative to the value of securities at the close of trading on April 29. Most analysts, according to MarketWatch, recommend buying Meta shares: 64 out of 71 give ratings Buy and Overweight, the remaining seven take a neutral position (Hold).

This article was AI-translated and verified by a human editor