Meta Closes $12.5 Billion Preferred Stock Sale, With A Forward Deal On 40 Million Shares Running Alongside
The 6.50% preferred converts into Class A stock by August 2029, while forward sales mean Meta gets no cash from its common shares at first.
Meta Platforms closed its sale of 250 million depositary shares of 6.50% mandatory convertible preferred stock on Thursday, raising about $12.5 billion in net proceeds, the company said. An 8-K filed Thursday shows a separate forward sale of 40 million Class A shares under which Meta receives no cash up front.
How the preferred is built
The agreement with underwriters Morgan Stanley and Goldman Sachs is dated October 26. Each depositary share is priced at $50 and represents a 1/20th interest in a preferred share with a $1,000 liquidation preference. Underwriters hold a 30-day option, beginning on the agreement date, to buy up to 37,500,000 more depositary shares to cover over-allotments.
The preferred accrues dividends at 6.50% a year, payable when declared in cash, Class A stock or a mix. The first payment is scheduled for February 15, 2027, with quarterly dates through August 15, 2029. Yahoo Finance calculated the annual dividend on the initial amount at $812.5 million.
Unless converted earlier, each preferred share converts around August 15, 2029 into between 1.3620 and 1.6000 Class A shares, depending on a 20-trading-day average price. Each depositary share converts into between 0.0681 and 0.0800 shares.
Forward sale defers the cash
Alongside the preferred, Meta signed forward sale agreements with Morgan Stanley Capital Services and Goldman Sachs covering 40,000,000 Class A shares. The forward sellers borrowed the shares and sold them to underwriters, so Meta receives no proceeds initially. The initial forward price is $622.91875 a share.
Meta picks its settlement dates, no later than November 19, 2027, and issues shares at the then-applicable forward price when it does. That price adjusts daily for an interest-rate factor and falls on certain specified dates. Underwriters have a 30-day option on 6,000,000 more shares, which would bring additional forward agreements.
The forward purchasers can force early settlement in certain events, including a dividend above a set amount, a share-borrowing shortfall, or a takeover announcement.
Limits on common dividends and buybacks
While any preferred remains outstanding, Meta cannot pay dividends on its common stock or repurchase common shares unless all accumulated and unpaid preferred dividends have been paid or set aside, subject to certain exceptions.
Meta, which runs Facebook, Instagram, WhatsApp and Threads and sells Quest headsets and AI glasses, earns substantially all of its revenue from advertising on its apps.
The underwriters' option on 37,500,000 more depositary shares runs 30 days from October 26, and the first preferred dividend is scheduled for February 15, 2027.
Sources
- 8-K Filing — Meta Platforms, Inc. (META) — SEC EDGAR
- Exhibit d183592dex11.htm — Meta Platforms, Inc. 8-K exhibit — SEC EDGAR
- Meta Announces Pricing of Offering of Depositary Shares Representing Series A Mandatory Convertible Preferred Stock and Offering of Class A Common Stock in Connection with Forward Sale Agreements – Company Announcement - FT.com — Financial Times
- Meta $25 billion stock offering draws about five times demand — qz.com
- Meta Stocks Move Lower With Supplier Funding and Deferred Equity Proceeds — Yahoo Finance
- Meta Platforms’ New Convertible Stock Offering Could Yield More Than 6% — Barron's
- Meta Announces Launch of Offering of Depositary Shares Representing Series A Mandatory Convertible Preferred Stock and Offering of Class A Common Stock in Connection with Forward Sale Agreements – Company Announcement - FT.com — Financial Times
