Meta Platforms Borrowing Strategy Highlights Strong Capital Fundamentals

3 months ago

Parkev Tatevosian

"So, Meta Platforms is planning to sell $30 billion of investment grade bonds on Thursday, the biggest high-grade bond corporate offering of the year and the company received record orders for the debt. And what that means is demand for this debt is very strong. Uh, lenders want to purchase. Lenders want to lend money to Meta Platforms because they feel relatively comfortable about getting their money back and making a good return on their investment. So, they're happy to lend the company money. And I'm not surprised. Meta Platforms is a cash generating machine. It operates on profit margins, operating profit margins that is above 40%. Really lucrative business model, very low debt to equity ratio. So, it's a relatively safe bet for lenders to give Meta Platforms money."

The speaker explains that Meta Platforms is issuing $30 billion in bonds—a record high-grade debt offering—due to strong demand from lenders. He emphasizes that Meta's robust cash generation, high profit margins, and low debt-to-equity ratio make it a safe borrower. The analysis outlines the benefits of debt financing over equity, highlighting the lower cost of debt and its positive impact on the company's weighted average cost of capital, ultimately boosting its intrinsic value per share.

Related Stocks