Seems like Meta is pursuing a reverse LBO: lay off a bunch of people, _then_ take on a bunch of debt to pay out as a shareholder dividend.
Meta plans $7B bond issue
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Re: Meta plans $7B bond issue
#42Meta 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
Apple has been pursuing a “cash neutral” policy for a while by selling bonds in order to do what Meta says they are going to do. I’m no corporate financial whiz but I think that using debt to do those things has some sort of tax advantage.
There also seems to be an effort to show a net zero cash holdings position in order to preempt any political attempts to try to take money that corporations are “just sitting on.” I think there was some rumblings of that when Apple had 100+ billion in the bank. When they got wind of various governments’ ideas of extra taxes on excess cash suddenly share buybacks seemed like a better idea than losing that money altogether.
Re: Meta plans $7B bond issue
#43Re: Meta plans $7B bond issue
#44Why 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.
“…they don’t think interest rates are dropping anymore soon.”
At one time they did not think they were going down soon and they did suddenly.
They also thought over hiring was a good idea.
It’s almost as if these people are not good predictors of the future, and are just socially networked such they never lose and it appears to morons as if divine mandate empowers them.
This species is such a joke. Lemmings enabling a minority of abusers. Since humanity is meaningless why not bioengineer a kaiju and have front row seats to the apocalypse. Slowly roasting to death in deference to Zuckerbergs of the world is super boring
Re: Meta plans $7B bond issue
#45If 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…
Compare to Apple who has been crazy profitable but who opted to pile up a cash hoard. Meta and Google and some others saw every spare billion as an opportunity to hire another moonshot team to build AI/VR robot cars. All that stuff was funded by their main businesses. Now they are basically giving up. Stick to their core businesses and just keep the cash.
To be fair, apple is famous for having poured money into AR and robot cars lately. “Project Titan” was a cash burning machine, and we’ve been expecting their rumored AR goggles any day now.
Apple may have had more discipline with hiring, but they definitely fund R&D ventures - especially the “moonshots” you mention. They seem to have avoided any crypto teams, and any space-tech teams, but they also seemed under invested in AI.
Re: Meta plans $7B bond issue
#46I know there are already lots of questions to this effect, but if anyone can point to a good blog post that outlines "Why massively profitable companies with huge amounts of cash sell lots of bonds", I'd love to see it! I can understand when interest rates are low as part of a "might as well get more money when it's nearly free" mindset, but as that's no longer the case, I don't understand the rationale behind this.
interest tax shield it's beneficial for companies to raise debt and pay interest
That makes 0 sense without more context or information. Even if interest is a tax deductible expense, it doesn't make sense to spend a dollar to save 30 cents.
Re: Meta plans $7B bond issue
#47If 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 (far less!). Are they gonna hire people back?
Layoffs were mostly recruiters and PMs. New hiring will be mostly SWEs.
Re: Meta plans $7B bond issue
#48Earlier quoted context omitted.
> 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.
They are not exactly trimming 'fat'. This latest round had numerous people who were getting high marks and even AE. There is some meme going around that this was a performance based layoff and it absolutely was not.
Trimming the fat is about organizational fat. Some teams could be bloated, or unnecessary, etc.
I don’t know what went on in meta, but a few years ago I worked on a product team in a tech company. That team had a dedicated sub-team who reworked our AWS hosting every year. The company had a full Dev-Ops team to do it for us. Those 4-5 people were just making busy work and design docs in their name. While I’ve since quit and moved on, i hear that team experienced layoffs this spring. That’s “fat” which can be trimmed even if the engineers are very capable people.
Re: Meta plans $7B bond issue
#49I know Facebook/Meta is huge and well established, but a 40 year bond seems like an eternity in the tech world. Is Meta that entrenched that people are this confident that they'll still be around in 40 years? Perhaps there's a lot more to their staying power and value than some web pages, apps, and VR hardware, but I'm not very aware of it. I did note in an article a couple weeks ago that they participate in groups t…
Consider the very first cohort of internet companies - AOL, CompuServe, Yahoo, Ask Jeeves, etc...
None of those businesses are around today, but how many of them had their equity erased and had their bondholders take a haircut? I can't say exactly, but my guess is that none of the top 10 biggest internet companies of that era had their equity fully wiped out.
Re: Meta plans $7B bond issue
#50Earlier quoted context omitted.
> 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.
They are not exactly trimming 'fat'. This latest round had numerous people who were getting high marks and even AE. There is some meme going around that this was a performance based layoff and it absolutely was not.
What's AE?