Meta decided to borrow, and launched a debt loan of 10 billion dollars

Meta from cash? The company, especially known for its social networks Facebook and Instagram, is looking for new money. For this, Meta will issue bonds, according to a document filed Thursday, August 4, 2022 by the SEC, the police of the American stock market. 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 maximum term of which is 40 years. It appears that Meta is looking to fund share buybacks and investments to transform its business.

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

The TikTok competition

In the background, TikTok seems above all to establish itself as a sustainable rival for Meta, which fears that young people will leave Facebook and Instagram in favor of the video sharing application. Behind a possible loss of daily users, there is a loss of advertising market share for 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 almost double compared to 2019. Almost 91% of US brands using influencer marketing will invest more in video this year, proof that this format is gaining momentum. However, if Instagram remains the leading influencer platform overall this year, TikTok is expected to overtake Instagram Reels in 2022.

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

The dear metaverse

Ultimately, Meta shows the metaverse’s many ambitions. This big project, which was revealed by Mark Zuckerberg last October, needs a lot of investment before it can see the light of day. Meta has been well established in the world of virtual reality for years with its Oculus headsets. But during the presentation of his metaverse project, Mark Zuckerberg seems to want to go further to create an immersive world where it is 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 will spend a lot of money. However, due to the decrease in its advertising revenues, the group risks limiting the costs related to virtual and augmented reality, which will be 3 billion dollars in the first quarter of 2022. This loan of 10 billion dollars part of this path. . This will give Meta more financial leeway to expand expensive initiatives as its cash flow dwindles.

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