Markets
Meta Fell 1.9% on a $95 Billion Plan to Sell New Stock
Meta plans to raise up to $95 billion by selling new stock: about $35 billion now and up to $60 billion of non-voting Class C shares from 2027. The shares closed 1.9% lower on Monday while the Nasdaq rose 0.8%, as Anthropic's public IPO filing lifted chip stocks. Nvidia, AMD and Broadcom, whose chips fill its data centres, may buy up to $5 billion of the new shares.
Monday was a good day for almost everything connected to artificial intelligence except the company spending the most on it. Anthropic's public IPO filing, which names the Nasdaq as its venue and ANT as its ticker, pushed the Philadelphia semiconductor index up 2.8% and the S&P 500's technology sector up 1.5%, the best of the 11 sectors. The Nasdaq Composite rose 0.83% to 26,169.38, the S&P 500 0.70% to 7,676.77 and the Dow 0.28% to 52,361.58, according to Reuters figures published by The Standard. Meta Platforms fell as much as 4% in the morning, Investing.com reported, recovered to a small gain, and then closed 1.9% lower after saying it plans to raise up to $95 billion in equity for data centres, cloud capacity and other AI infrastructure.
The plan comes in two parts. The first, launched on Monday and led by Morgan Stanley and Goldman Sachs, is about $35 billion: $22.5 billion of Class A common stock sold through forward sale agreements, with a 30-day option for the underwriters to buy up to $3.375 billion more, and about $12.5 billion of mandatory convertible preferred stock, sold as 250 million depositary shares that convert into common stock around August 15, 2029 and will seek a Nasdaq listing as METAM. Because the forward sales can be settled as late as November 2027, Meta does not expect to receive cash for the common stock straight away, according to FinanceFeeds' reading of the free writing prospectus. Nvidia, AMD and Broadcom have expressed non-binding interest in buying up to $5 billion of the common shares at the same price as other investors. The second part is an at-the-market programme of up to $60 billion of non-voting Class C shares, not expected to start before the first quarter of 2027; no agreement has been signed for it.
The reason is in last week's numbers. Meta guided 2026 capital spending to $135 billion to $145 billion, while operating cash flow over the first nine months was $97 billion and cash and marketable securities stood at about $82 billion at the end of September, Investing.com noted. Third-quarter free cash flow was negative at $2.12 billion, the first negative quarter since 2012, and the stock fell nearly 7% on October 22. Selling non-voting shares lets the company raise equity without diluting the voting control of Mark Zuckerberg and other holders of voting stock, which is why the larger programme waits for the Class C shares to start trading.
Dilution is the cost shareholders are weighing. FinanceFeeds estimated that $22.5 billion at Monday's pre-market price of about $635 is roughly 35 million shares, about 1.4% of the 2.56 billion outstanding, and that the full $95 billion would equal about 6% of the current market value spread over roughly three years. The stock ended Friday at $642.62 and Monday's fall left it near $630, against about $709 before the results on October 21. Most analysts kept their ratings; Mizuho reiterated Buy with a $950 target on Monday, while Scotiabank and Wedbush stayed at Hold after raising targets to $650 and $730.
The chipmakers' participation is the detail worth keeping. Nvidia, AMD and Broadcom sell the processors and networking gear that Meta's spending pays for, and they may now put some of that revenue back into Meta's equity. It is a small amount next to the total, but it shows how closely the suppliers' fortunes are tied to the buyers' ability to keep spending. Microsoft, Alphabet and Amazon report this week, and the Fed decides on Wednesday with CME FedWatch pricing a 12.7% chance of a hike. If their capital budgets also rise, the market will start asking which of them is next to need outside money.