Meta borrows 10 billion dollars, and goes into debt for the first time

After a fall in its turnover in the last quarter, Meta must seek funds to finance its projects.

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In the second quarter of 2022, Meta, the parent company of Facebook and Instagram, posted a 1% drop in its turnover, the first since its IPO in 2012. The current economic context is not favorable to the tech sector. While Mark Zuckerberg’s company has bet everything on the metaverse, the development of virtual and augmented reality technologies is very expensive.

After investing more than $10 billion in this sector alone in 2021, the tech giant was forced to cut its budget the following year. To bounce back, Meta decided to issue bonds.

In response to an uncertain financial situation

In a document filed on August 4 by Meta with the Securities and Exchange Commission (SEC), the policeman of the American financial markets, the parent company of Facebook indicated that it had carried out a bond issue, contracting the first debt in its history. Mark Zuckerberg’s company confirmed the information with Reuters on August 9, 2022, specifying that the sum of money borrowed amounts to 10 billion dollars.

Until recently Meta was the only company among the GAFAMs to have never contracted debt. The company’s sluggish results in the second quarter prompted it to change its strategy. In particular, its profit fell by 36% compared to the previous year.

That’s partly a consequence of fierce competition from TikTok, which prompted Meta to invest in major changes to its social media channels, including Instagram.

Source: The Digital Century

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