Meta draws $58 billion in orders for AI bond sale

Meta Platforms ↘ 3.68% drew as much as $58 billion of orders for the US dollar portion of a bond sale on Tuesday, November 3. Demand came in at about four times the offering's expected size of at least $15 billion, Bloomberg reported, citing people familiar with the matter. That ratio is above the 3.8-times average peak order book for major US dollar tech bond deals this year. Meta needed higher yields to get there, though, as investors grow more doubtful about Big Tech's spending on artificial intelligence.bloomberg.com

The dollar notes are the largest piece of a cross-border raise of at least $20 billion. That total includes Meta's first euro-denominated bond, which could come as soon as Wednesday, according to Bloomberg reporting carried by FA Magazine. CNBC reported that Meta is seeking $20 billion to $25 billion in total, with about two-thirds in dollars and one-third in euros. Meta shares rose more than 2% on the news.invezz.com+2

Higher Borrowing Costs

The dollar notes come in five tranches with maturities from five to 30 years. Initial price talk ranged from 130 basis points over Treasuries on the five-year notes to 250 basis points on the 30-year bonds, Investing.com reported. As orders came in, the spread on the 2056 notes tightened to about 2.2 percentage points. That is still nearly 0.9 percentage points wider than a comparable Meta bond sold in April. Citigroup ↘ 4.47% and Morgan Stanley ↘ 5.63% are the joint book-running managers. In a preliminary prospectus, Meta said it would use the proceeds for "general corporate purposes".finance.yahoo.com+2

This is Meta's first high-grade bond sale since April. That earlier deal raised $25 billion and drew peak orders of $96 billion.finance.yahoo.com

Big Tech Borrowing Wave

Other tech companies are also borrowing heavily. Oracle ↘ 7.05% sold bonds on Monday, Alphabet ↘ 1.40% raised €6 billion in euros, and Microsoft ↘ 2.43% sold $25 billion of bonds last week. Bloomberg Intelligence expects a group of hyperscalers and so-called neocloud companies to invest nearly $4.5 trillion over the next three years, with Meta alone projected to spend more than $740 billion.invezz.com+1

Meta has also raised money by selling stock. Last week it priced $25 billion of common stock and $12.5 billion of preferred shares, and it has outlined an at-the-market program of up to $60 billion. The funding push comes days after S&P Global Ratings ↘ 1.95% moved its outlook on Meta's AA- rating to negative. Strong demand still leaves a question hanging over the market: how much more AI debt investors can absorb, and whether that spending will pay off.finance.yahoo.com+2