Meta prices upsized $25 billion stock sale at $625 a share

Meta Platforms ↘ 1.64% has priced a $25 billion common stock offering at $625 per share. The deal was raised from the $22.5 billion it first announced, and it comes alongside a $12.5 billion sale of mandatory convertible preferred stock, according to the company. These sales are the first part of the largest equity raise in Meta's history. The plan now totals up to $97.5 billion and is meant to pay for the company's AI infrastructure buildout, Business Standard reported.prnewswire.com+1

Strong demand, delayed cash

Bloomberg reported that investors put in orders for about five times the common shares on offer. More than half of the shares went to long-only and existing investors, and the 15 largest buyers took about 70% of the deal, according to people familiar with the offering.bloomberg.com

The common shares are being sold through forward sale agreements with Morgan Stanley ↗ 1.86% and Goldman Sachs The Goldman Sachs Group, Inc. ↗ 2.07%. As a result, Meta does not expect to receive any money upfront. It expects net proceeds of about $24.9 billion when the agreements settle, on or before November 19, 2027, the company said. The preferred stock pays 6.5% a year and will automatically convert into common shares around August 15, 2029. Both offerings are expected to close on October 29. Meta has applied to list the preferred shares on the Nasdaq ↘ 0.34% under the symbol "METAM."prnewswire.com

A $60 billion follow-on

The biggest piece hasn't been sold yet. Meta plans an at-the-market program of up to $60 billion, which means selling shares gradually at market prices. It would sell its new nonvoting Class C stock, which is expected to start trading in the first quarter of 2027. Timing and terms have not been finalized, Reuters reported. Nvidia ↗ 0.90%, AMD Advanced Micro Devices, Inc. ↗ 5.45% and Broadcom ↗ 4.00% signaled interest in buying up to $5 billion of Class A shares combined. That interest adds to concerns about "circular" financing between AI suppliers and their customers, Reuters noted.marketscreener.com+1

The shares fell after Monday's announcement and slipped again in Tuesday morning trading. The $625 offering price was below the prior session's close, and analysts estimate that the full plan could reduce existing holders' ownership by roughly 5% to 6%, Investing.com reported.uk.investing.com

Spending outpaces cash

Last quarter, Meta spent almost $34 billion on buildings and equipment while its business generated almost $33 billion in cash. That made free cash flow negative for the first time since its 2012 IPO, Yahoo Finance reported. The nonvoting share structure lets Meta raise capital while Mark Zuckerberg keeps about 61% of the votes, the outlet added. Alphabet ↗ 0.84% and Microsoft ↘ 0.24% report earnings on Wednesday.finance.yahoo.com

"We expect investors to continue to question the financing and potential for future capital raises," William Blair analysts wrote, per Reuters.rmb.reuters.com