Meta to sell $30B in bonds to build AI datacenters

Even the world's richest companies need outside help to fulfill their datacenter dreams. Now, Meta is selling $30 billion in bonds to build out its infrastructure estate and support its ambition in AI markets. Some of these won't mature for 40 years. The social media giant — owner of Facebook, WhatsApp and Instagram — launched …

[IanRS]

Repayment duration

I'm not sure whether I would be more worried about Meta not being around in 40 years to pay off their debts, or more worried that they would be.

[retiredFool]

Re: Repayment duration

I buy some 20 year bonds and could be dead before they redeem. But then again, maybe not. I tend towards the tax exempt ones, and really they are paying a much higher effective yield than these. And those TE ones have a people backing them be it a city, state, or school. I would not touch these Meta ones with a ten foot pole. Bond sales are usually the last step in the tits up process.

[Like a badger]

Re: Repayment duration

When even the FT are questioning when the AI bubble will burst (31/10 Alphaville column for those interested) it would seem that doom is upon those throwing money at such things.

Having said that, very few to none of the buyers of these bonds will expect to keep them to maturity, they're just working on the basis that they can get a good price when they sell them on.

[Anonymous Coward]

Re: Repayment duration

Having said that, very few to none of the buyers of these bonds will expect to keep them to maturity, they're just working on the basis that they can get a good price when they sell them on.

The musical chairs typical of a bubble ?

The tempo characteristically rises to a tarantella before the bubble bursts.

Toby Nangle "..., things are starting to look maybe a little pricey."

I would have gone with "dicey." ;)

[Like a badger]

Re: Repayment duration

"The musical chairs typical of a bubble ?"

Yes and no. The very fact that these are being touted as such big numbers for a specific purpose over a long term says (along with other indicators) that we're in bubble territory. But expectations of secondary trading of the bonds is entirely normal. Very few people or businesses buy long term bonds to hold until maturity. They're usually buying bonds because it diversifies their investment portfolio, and if they are doing that a mix of maturities also makes sense. If not being held to maturity then the buyer is reliant upon a secondary bond market. The value of a bond when on secondary markets isn't simply the NPV of the bonds interest and capital repayment, it's affected by changes in interest rates, whether equities are going up or down, changes in credit quality of the issuer, whether the bond is secured on assets and so on.

[retiredFool]

Re: Repayment duration

True you can sell bonds in the secondary fairly easily, and the fact this is such a large offering will help that. But, unlike stocks, not nearly as liquid. If the bottom falls, you can do a limit price on your stock to get out with usually around the limit as the loss. They aren't called stop-loss for nothing. Bonds on the other hand not an option. You'd have to see it coming, and even then, may not find a buyer. I do plan to hold my bonds though, that tax exempt thing is gold. I've got some long term treasuries too, those I may sell. Rates going down might tempt me. They are over par now. If rates drop to 3-ish, that could be quite tempting.

[Anonymous Coward]

Re: Repayment duration

… yeah but 40 years. It’s not Federal Government debt.

[Yet Another Anonymous coward]

Re: Repayment duration

>And those TE ones have a people backing them be it a city, state,

Depends where you see the risk:

Dear Leader demands everyone swap their US government bonds for 0% interest non-tradeable 100 year assets

City police shoot a white kid and city is bankrupted by settlement

Meta goes bust and can't pay it's bonds

[Anonymous Coward]

Re: Repayment duration

No That will be the credit default swaps market where they are abstracting the risk elsewhere to shaft other poor suckers at the same wrong end of the easy money from tulips, south sea, Darien scheme thru Enron, dot-com, financial crisis and crypto.

[msknight]

Just give me the digital burger.

(dang it, why isn't there a burger icon.)

[Anonymous Coward]

the rising trade in credit default swaps ...

has the very definite odour of 2007-8.

Easy to forget the next cab off the rank after "too big to fail " is "too big to rescue."

[munnoch]

$30B principal at a rough average of 5%pa makes around $1.5B just to service the debt... plus the sinking fund for repayment.

[talk_is_cheap]

There will be no sinking fund; instead, a plan will be implemented to issue additional bonds in the future, allowing the old ones to be repaid.

[IGotOut]

I think this is a great idea.

I'm going to invest and put them aside, along with my other investments, MySpace, Bebo, Vine, Friends Reunited, LiveJournal and Friendster.

[Catch-the-Pigeon]

the metaverse was a great idea at the time, spent billions on it, total waste of time and money. Sequel coming ?

[Anonymous Coward]

Oh yes I'll trust Meta will exist!

I don't know if the bonds come with some insurance but who would trust a technology, or indeed any other company to exist or pay out in 40 years?? I suppose some might take a punt in the yet to be born grandchildren's names. Frankly, I wouldn't even contemplate a treasury beyond 5 years.

[Jellied Eel]

Re: Oh yes I'll trust Meta will exist!

I don't know if the bonds come with some insurance but who would trust a technology, or indeed any other company to exist or pay out in 40 years??

That's the gamble. But hedging can provide some insurance. Or given the way the casinos work, you can gamble that at some point in the next X years, FaceMelta does the Ch.11 thing, debt is restructured and shareholders get wiped out. Then bondholders have some security and can end up with debt converted to equity and new shares in the freshly laundered balance sheet. And then if it's a pre-packaged bankruptcy with a buyer lined up, might make some more money flogging those shares to the buyer. But that can get a bit murky & rather risky given things like debt rankings/seniority and access to information.

[IGnatius T Foobar !]

Facebook et al

Meta isn't going to exist in 2065. The AI bubble is going to burst at some point, and AI is going to commoditize at some point and run on "regular" hardware. Then the folks at Meta won't have much left except for Instagram. And we know that social networks have finite lifetimes.

A bond issue means that they couldn't get "real" investors on board.