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Meta plans $7B bond issue

reuters.com

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Re: Meta plans $7B bond issue

#21

Post by s1artibartfast »

hospitalJail wrote: post #4

Broken link to the report, doesn't say what the investment is for. Its hard to figure out what is going to happen to facebook in the future. This is one of those few moments I'd like to be a non-US native to understand if Facebook is doing well/growing outside the US, or if its dying out. (I don't think Instagram is going to last too much longer, the quality has collapsed)

I'm in the US and haven't used facebook in 10 years, but thinking of getting back on. With the death of forums, self destructive nature of reddit, I keep finding myself turning to fakebook groups to keep up on relevant interests.

Re: Meta plans $7B bond issue

#22

Post by arcticbull »

bastawhiz wrote: post #10

If meta needs to lay off tens of thousands of people to make their financials look good enough to appeal to investors, that suggests to a layman like me that they weren't turning enough profit per employee to justify the things those people are working on. This comes, notably, after raising $10B last year before the layoffs. So besides stock buybacks, what does it actually mean "to build a more traditional balance sh…

They definitely were making tons of profit per employee.

They've consistently been making $1.2-1.6M in revenue per employee, and their net profit margin has been 20-40%.

They just thought they could make more money.

[edit] I think Patrick McKenzie did a great job of explaining the post-COVID layoffs on Odd Lots a few months ago [1], as saying that companies hired to (a) keep the lights on with a ton of new users (b) tracking the growth trendline assuming things wouldn't return to normal and (c) they didn't see the ordinary 6% annual attrition baked into HR expectations due to employee uncertainty.

So from that perspective, a bond offering seems fine, IMO. Better than a dilutive secondary offering.

[1] https://www.youtube.com/watch?v=Hb7G7sY4p9o

Re: Meta plans $7B bond issue

#23

Post by 0zemp2c »

bastawhiz wrote: post #10

If meta needs to lay off tens of thousands of people to make their financials look good enough to appeal to investors, that suggests to a layman like me that they weren't turning enough profit per employee to justify the things those people are working on. This comes, notably, after raising $10B last year before the layoffs. So besides stock buybacks, what does it actually mean "to build a more traditional balance sh…

they lay off because they can

they issue bonds because they can

its smart - as money flees iffy industries like banking, it will be looking for a safe home...big tech will have no issue attracting capital

the only real danger is big tech getting extremely overbought, creating another systemic risk

Re: Meta plans $7B bond issue

#24

Post by ProAm »

bastawhiz wrote: post #10

If meta needs to lay off tens of thousands of people to make their financials look good enough to appeal to investors, that suggests to a layman like me that they weren't turning enough profit per employee to justify the things those people are working on. This comes, notably, after raising $10B last year before the layoffs. So besides stock buybacks, what does it actually mean "to build a more traditional balance sh…

> Layoffs mean they're doing less

This isn't true, it means they had fat to trim. People that were under performing or working on nothing. There was a hiring arms race the last several years and everyone over hired fearing other companies would get talent first. The industry at most of the notable tech companies was bloated.

Re: Meta plans $7B bond issue

#25

Post by thoughtstheseus »

bastawhiz wrote: post #10

If meta needs to lay off tens of thousands of people to make their financials look good enough to appeal to investors, that suggests to a layman like me that they weren't turning enough profit per employee to justify the things those people are working on. This comes, notably, after raising $10B last year before the layoffs. So besides stock buybacks, what does it actually mean "to build a more traditional balance sh…

Facebook is now a cash cow making $40 billion of EBITDA and $20 billion of net income annually. They have ~$20 billion of net debt or about one years worth of earnings.

Debt investors likely believe the company can handle a higher debt load.

Re: Meta plans $7B bond issue

#26

Post by 0zemp2c »

chris_wot wrote: post #17
ramesh31 wrote: post #11

Earlier quoted context omitted.

>I think I'm trying to state: "Aren't the bulk of Meta's offerings too susceptible to trends to garner the trust required for a 40 year bond?" Meta has more cash on hand and revenue than most countries . They are an institution unto themselves at this point, regardless of the future success of any individual product.

So why do they need to raise more funds?

why does any company?

because they see the terms as advantageous

all the money-flush tech companies issue debt, even though they have no "reason" to

Re: Meta plans $7B bond issue

#27

Post by mminer237 »

devnull3 wrote: post #9

Meta has ~$40B as Cash-on-Hand [1]. Why does it need to raise this money via bonds? [1] https://companiesmarketcap.com/meta-platforms/cash-on-hand

I can't find any solid information, but is it possible it's largely stuck in Ireland? By borrowing money and paying the interest with out-of-country cash, they should be able to avoid US tax, right?

Re: Meta plans $7B bond issue

#28

Post by voisin »

chris_wot wrote: post #17
ramesh31 wrote: post #11

Earlier quoted context omitted.

>I think I'm trying to state: "Aren't the bulk of Meta's offerings too susceptible to trends to garner the trust required for a 40 year bond?" Meta has more cash on hand and revenue than most countries . They are an institution unto themselves at this point, regardless of the future success of any individual product.

So why do they need to raise more funds?

To avoid taxes many companies keep profits offshore in lower tax jurisdictions, only paying US taxes when money is repatriated. It is super common for companies to have billions offshore but to keep it there, take out US debt to und share buybacks or other US domestic initiatives and then only repatriate each year the amount needed to service that debt.

IMO, it’s a stupid loophole that legislators should close.

Re: Meta plans $7B bond issue

#29

Post by Out_of_Characte »

dougmwne wrote: post #7

Why would Facebook need to raise all this cash? Don’t they have plenty of profit? Aren’t interest rates high enough to discourage borrowing against future profits like this?

This is an investor's game. Why waste profits if you can raise 7B to invest for safe returns?

Re: Meta plans $7B bond issue

#30

Post by sowbug »

dougmwne wrote: post #7

Why would Facebook need to raise all this cash? Don’t they have plenty of profit? Aren’t interest rates high enough to discourage borrowing against future profits like this?

It's not about need. It's just a rational financial decision. They believe they can make more profit with the cash than the price they're paying in interest.

It also means they don't think interest rates are dropping anytime soon.

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