For the first time in its history, Meta (parent company of Facebook and Instagram) will launch a loan, a sign that the social media giant lacks funds to finance its short and long-term ambitions. The Californian group will issue bonds, according to a document it filed Thursday with the SEC, the American stock market watchdog.
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“Meta intends to use the proceeds of the loan for general purposes, which may include (…) capital expenditures, share buybacks, acquisitions or investments”, specifies the group of Mark Zuckerberg. It does not indicate the amount of funds it wishes to raise, nor the duration of the bonds.
According to the Bloomberg news agency, Meta is seeking between 8 and 10 billion dollars. The sum would be divided into four loans, and the longest would be for 40 years, with interest 1.8 percentage points higher than that of US Treasury bonds.
Advertiser budget cuts
Last week, Meta published disappointing financial results: its quarterly revenue fell for the first time in its history, and its net profit fell 36% year on year, to $6.7 billion (6 .4 billion Swiss francs).
Read again: Meta’s quarterly revenue declines for the first time in its history
The social network, the world’s number two in advertising, is facing budget cuts from advertisers, due to the poor economic climate, and competition from other platforms such as TikTok, which is very popular among the youngest.
“The situation seems worse than three months ago,” Mark Zuckerberg recently acknowledged during a conference call with analysts.
Issuing bonds is a “good idea,” according to analyst Dan Ives of Wedbush Securities. “They should have done this a long time ago.” “Unlike other big tech players, Meta has no debt. The company will implement its strategy on the metaverse, aggressively, and it requires a lot of capital,” he told AFP.
Focus on recommendation algorithm and Reels
Last fall, Facebook renamed itself Meta with the stated ambition of building the “metaverse”, a parallel universe accessible in augmented and virtual reality (AR and VR), presented as the future of the Internet.
But since early February, its share price has halved. More than 400 billion dollars (382 billion Swiss francs) of market capitalization went up in smoke.
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“We are focused on long-term investments that will enable us to come out of this economic downturn stronger, starting with the recommendation algorithm and ‘Reels’ (formats that mimic those of TikTok), our new advertising infrastructure and the metaverse,” said Mark Zuckerberg. It has also planned to reduce the pace of hiring, like many companies in the sector.
On Wall Street, the title which concluded up 1.05% Thursday at 170.57 dollars (162.89 Swiss francs), fell 0.16% in electronic trading after the close.