Meta increases size of planned equity offering to $97.5-billion

Meta Platforms META-Q on Tuesday raised the planned size of its largest-ever equity offerings to US$97.5-billion, as the social media giant taps the public market to aggressively expand its AI infrastructure.

The fundraising plan, among the biggest by an AI company, has also drawn interest of up to US$5-billion in total from Nvidia NVDA-Q, Advanced Micro Devices AMD-Q and Broadcom AVGO-Q for Class A common shares. In a separate statement, Nvidia said it would invest US$3-billion in Meta’s equity offering.

Their funding interest adds to concerns about an increasingly circular flow of capital in the AI industry, as chip suppliers help finance the expansion of one of their biggest customers. Meta has been pouring money into chips and data centers to compete better with OpenAI and Anthropic.

The Facebook parent now plans to raise US$25-billion in common stock, compared with US$22.5-billion disclosed on Monday. It has priced the shares at US$625 each.

The company’s shares closed down nearly 2 per cent at US$630.56 on Monday.

It also plans to raise about US$12.5-billion more through the sale of 250 million convertible preferred depositary shares at US$50 apiece.

Besides, the social media giant plans a separate program to sell up to US$60-billion in shares over time at prevailing market prices.

While the company has not yet finalized the timing and terms for its at-the-market offering, it expects the sale to begin after its planned non-voting Class C shares start trading in the first quarter of 2027.

“We expect investors to continue to question the financing and potential for future capital raises,” William Blair analysts said in a note.

“Overall, we believe the financing reinforces both Meta’s confidence in the long-term returns from AI investment and the increasingly capital-intensive nature of pursuing that opportunity.”

Meta’s latest fundraising further underscores a shift among companies increasingly tapping debt markets and raising equity to bolster their AI infrastructure, after previously relying on cash to fund their investments. Alphabet had increased its equity offerings to US$84.75-billion in June.

Separately on Monday, SpaceX SPCX-Q said an affiliate of Apollo Global Management will buy AI chips and server hardware and lease them to the rockets-to-AI firm, in a deal with total principal payments of about US$40-billion.

Meta’s AI spending is burning cash

Meta has committed to spending about US$825-billion in the future, driven primarily by growing investments in data centre, AI-related infrastructure and cloud computing power.

But the aggressive expansion has eroded its historically strong free cash flow.

The company reported a US$2.12-billion cash burn in the third quarter, its first negative free cash flow in over a decade, compared with a positive cash flow of US10.63-billion a year ago.

Still, the early popularity of its consumer-focused AI agent Muse and release of a competitive new series of AI models have helped partly justify Meta’s aggressive investments.

“We believe that Meta will ultimately produce a profitable AI business and its returns longer-term should help the company diversify, although the path may not be linear,” William Blair analysts said.

The company had US$82.45-billion in cash, cash equivalents, and marketable securities and US$80.92-billion in long-term debt as of Sept. 30, according to its latest quarterly filing.

Last week, Meta raised the lower end of its annual capital expenditure forecast to US$135-billion to US$145-billion.

The company said it would issue Class C common stock in January 2027, effectively creating a two-for-one split, to fund acquisitions and retain top talent while maintaining CEO Mark Zuckerberg’s control.

Meta agreed to grant Zuckerberg Class C shares he can sell to help pay a potential California billionaire wealth tax, in exchange for his commitment to remain in California.