Market Extra: Meta’s first-ever corporate bond deal sees $30 billion in demand despite Zuckerberg’s gloomy warning

by | Aug 4, 2022 | Stock Market

Corporate bond investors appeared pretty bullish on the metaverse Thursday, or at least about digital advertising. Meta Platforms Inc.
the parent of Facebook, on Thursday saw roughly $30 billion in demand for its debut $10 billion, 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 WhatsApp under its umbrella, could secure cheaper debt than was proposed only a few hours prior. Meta declined to comment beyond a public filing for the debt offering. Pricing on the company’s five-year class was 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 fetched 115 basis points above the
benchmark. That represents 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. Tech giant Apple Inc.
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 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 t …

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