Corporate bond investors appeared pretty bullish on the metaverse on Thursday, or at least about digital advertising.
Meta Platforms Inc.,
the parent of Facebook, on Thursday saw roughly $30 billion in demand for its $10 billion debut, four-part U.S. corporate bond deal, according to a person with knowledge of the dealings and Informa Global Markets.
That’s a big deal. While Meta reported its first-ever drop in revenue in the second-quarter, investment bankers still were able to pull in price talk on each class of A1 to AA- rated bonds from the social-media giant.
That all but assured Meta, which also has Instagram and What’s App under its umbrella, secures cheaper debt than was proposed only a few hours ago.
Meta didn’t immediately respond to a request for comment.
Specifically, pricing on the company’s five-year class was expected at 75 basis points above the risk-free Treasury rate, down from an initial range of 90 basis points, according to Informa Global Markets.
The 10-year class was expected to price at 115 basis points above the
benchmark. That would represent a premium to the roughly 86 basis point spread on similar 3.6% coupon bonds trading on Thursday from retail giant Amazon, according to BondCliq data.
Early last week, the parent company of Facebook reported second-quarter earnings of $6.69 billion, or $2.46 a share, down from $3.61 a share last year, on sales of $28.82 billion, down from $29.08 billion a year ago.
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Meta Chief Executive Mark Zuckerberg said in a conference call after the results were dropped.
Not everyone was feeling as bullish about the new Meta bond deal. “While Meta has built a commanding ecosystem of apps and is investing heavily in the metaverse for the future (which may or may not be successful), we don’t believe the company’s economic moat is nearly as strong as that of Amazon,” wrote CreditSights analysts on Thursday, about the bond offering.
The team said it sees difficulties with a social-media platform trying to “replicate Amazon’s
e-commerce/logistics or cloud computing business.”
“We’re not saying Meta will go the way of Myspace, although we do believe its business is relatively more vulnerable to new entrants and changing user preferences.”
Meta shares were up 0.8% on Thursday, but still down 49% on the year so far, according to FactSet.