Meta arranged two large equity financings: an offering of mandatory convertible preferred stock that closed on Oct. 29, and a forward sale tied to 40 million shares of Class A common stock. The preferred offering brings in capital through securities that are designed to convert into common stock; the forward sale defers the company’s receipt of proceeds and issuance of new shares until a later settlement.
Key details
-
Preferred-stock offering: Meta sold 250 million depositary shares. Each represents one-twentieth of a share of 6.50% Series A mandatory convertible preferred stock, with a $1,000 liquidation preference per preferred share. That equates to a $50 liquidation preference for each depositary share and $12.5 billion in total liquidation preference for the offering.
-
Dividend rate: The 6.50% rate applied to the preferred stock’s $1,000 liquidation preference implies $65 a year per preferred share, or $3.25 per depositary share, subject to the preferred stock’s terms.
-
Additional preferred shares possible: The underwriters have a 30-day option to buy up to 37.5 million more depositary shares, solely to cover over-allotments. If fully exercised, that would represent another $1.875 billion of liquidation preference.
-
Common-stock forward sale: Banks sold 40 million Class A shares to investors after borrowing the shares from third parties. Meta will not receive proceeds from that initial sale. Instead, it is scheduled to issue shares to the forward purchasers later and receive the applicable forward sale price at settlement.
-
Timing and initial price: Meta can choose settlement dates, subject to conditions, through Nov. 19, 2027. The initial forward price is $622.91875 per share, before specified adjustments. At that initial price, the 40 million shares represent about $24.9 billion, but that is not a fixed proceeds amount: the price can change over time under the agreements.
-
Potential additional common shares: The common-stock underwriters can buy up to 6 million more shares within 30 days. If they do, Meta plans to enter into additional forward sale agreements for those shares.
-
Class C stock settlement option: Once Meta issues Class C common stock and certain conditions are met, the forward agreements may cover both Class A and Class C shares. In some circumstances, Meta could settle by delivering only Class C shares. The applicable forward price may then be reduced, including based in part on the trading-price difference between the two classes.
Plain-English implications
The preferred offering provides financing through securities that are mandatory convertible, while the forward agreements defer both Meta’s receipt of cash and its issuance of new shares. When the forward agreements are settled, Meta will issue shares, increasing its share count; the amount of proceeds and the precise share-class mix will depend on the final settlement terms and any adjustments. The terms provided here do not specify the preferred stock’s conversion ratio or the final cash proceeds from either financing.