Meta is officially in debt

 TikTok's success has eclipsed Instagram and Facebook, sending the company into debt.

 TikTok's success has eclipsed Instagram and Facebook, sending the company into debt.

Meta is taking out a loan, ending its run as one of the only major firms without debt, as the company battles uncertainty in the face of TikTok's rising popularity, whilst also trying to get the Metaverse off the ground.

Concerns over the company's future have sent its stock plummeting, as they continue to plan what the next iteration of the internet will look like, pouring billions into the future of the Metaverse.

On Thursday Meta reported that it has begun offering bonds to raise money for uses such as “capital expenditures, repurchases of outstanding shares of its common stock, acquisitions, or investments.”

In simple terms, a bond is loan from an investor to a borrower (in this case, Meta), that allows the borrower to use the money to fund its operations, and the investor receives interest on the investment.

Meta, which owns Facebook, Instagram and WhatsApp, declined to comment beyond its official filing to the Securities and Exchange Commission in the US.

Its filing does not indicate the amount of funds it wants to raise, nor the term of the bonds, but Bloomberg news agency reported Meta may sell $8-10 billion in debt.

Last week, Meta reported its first year-on-year drop in quarterly revenue, and its net profit dropped 36% to $6.7 billion.

The firm, which relies almost exclusively on advertising revenue, has been hit by a decline in advertisers’ spending driven in part by economic uncertainty and TikTok’s rise.

“I’d say that the situation seems worse than it did a quarter ago,” CEO Mark Zuckerberg told analysts after disappointing results last week.

Some analysts said the company, which rebranded itself last year, should have taken on a debt long ago.

“Meta has no debt on its balance sheet unlike other big technology players and the company will aggressively build out its metaverse strategy and that take a lot of capital,” said analyst Dan Ives. “This is a smart move,” he added.

Facebook renamed itself Meta to signal its pivot to building its vision for an interactive virtual and augmented reality world that it sees as the future. But since February, its share price has been divided by two, with more than $400 billion in market capitalisation disappearing.

“We’re focused on making the long term investments that will position us to be stronger coming out of this downturn,” Zuckerberg told analysts last week.