Meta Closes Offering of 250 Million Preferred Shares With 6.50% Annual Dividend
Key Facts
Meta closed an offering on October 29 of 250 million depositary shares, each representing an interest in a share of its 6.50% Series A mandatory convertible preferred stock, according to a company filing with the U.S. Securities and Exchange Commission. Each depositary share represents one-twentieth of a preferred share, and dividends will be paid if declared by the board. The public offering price was $50 per depositary share, according to the prospectus. The company also gave underwriters an option to buy up to 37.5 million additional shares to cover over-allotments. The financing comes as Meta expands its AI investments, while investors focus on the cost of that expansion and the ability of cash flows to absorb it.
The offering terms provide for declared dividends to be paid quarterly, on dates beginning February 15, 2027, and ending August 15, 2029. Dividends may be paid in cash, Class A shares or a combination of the two, according to the prospectus. The 6.50% rate means the preferred shares carry a specified annual return on the $1,000 liquidation preference per preferred share, but payment remains subject to board approval. This financing therefore differs from an ordinary share offering: it includes a dividend obligation under the stated terms, alongside a scheduled conversion later on. The disclosures did not specify a guaranteed total dividend amount, and the annual rate alone does not make dividends automatically payable.
Unless converted earlier, the preferred shares will mandatorily convert into Class A shares at a rate of between 1.3620 and 1.6000 shares per preferred share. The final rate will be determined based on the average volume-weighted share price over a 20-trading-day measurement period preceding August 15, 2029, according to the prospectus. This range sets advance limits on the number of ordinary shares that may be issued upon conversion, while the final number will depend on the stock’s performance during the measurement period. The mechanism shows that the offering combines specified annual dividends under its terms with a future conversion into ordinary shares. The conversion terms and dividend dates are part of a financing structure extending through 2029.
The deal is significant amid broader plans to raise financing from equity markets for AI infrastructure. Reuters reported that Meta was planning to sell $97.5 billion in shares to support the expansion. On October 30, S&P Global Ratings revised its outlook on the company to negative from stable, citing uncertainty over capital spending and operating free cash flow, according to a Reuters report. The published report did not establish that the credit rating itself had changed. The agency linked its concerns to an expected operating free cash flow deficit, making the scale and financing of spending a central focus in assessing the company’s plans.
According to Reuters’ account of S&P’s estimates, the agency expects an operating free cash flow deficit of $39 billion in 2026 and $71 billion in 2027, and sees the deficit potentially continuing beyond 2028. It also expects Meta to fund its entire cash shortfall in 2028 with debt. The figures reflect a growing financing challenge if large investments continue before generating sufficient cash flows, according to the agency’s assessment. Meta responded that it disagrees with S&P’s assessment of its ability to generate returns from AI investments and said significant product and business opportunities lie ahead. The disagreement puts estimates of commercial returns against the risks the agency sees for cash flows.
The financing concerns come despite strong third-quarter results. Meta’s revenue was $64.60 billion, compared with $51.24 billion in the same period a year earlier, while net income rose to $9.86 billion from $2.71 billion, according to the Associated Press. The agency said revenue increased 26% year over year. The company’s shares also rose 2.9% in extended trading after results were announced on October 21, the same report said. In EL7 data, the stock closed at $606.73 on November 2, then at $622.8716 on November 3; the two consecutive closes provide context for the share’s movement on the news day without establishing the percentage gain cited in other reports.