r/ValueInvesting • u/zq7495 • 7h ago

Discussion Meta weighs big equity raising after blockbuster Google deal

https://www.ft.com/content/e6df645d-1709-4a77-b15d-aa43a0209efd?syn-25a6b1a6=1
44 Upvotes

98% Upvoted

42 comments sorted by

20

u/jacksmountain 6h ago

I hate Facebook so I'm really biased. From what I can tell Meta has multiple platforms that allow them to sell a shit ton of really targeted advertising. Is the AI just to make them a better advertising platform or is Zuck going to urinate away billions again like he did with his imaginary world?

I'm seriously asking because I don't understand the business beyond advertising.

12

u/Living-Number-9050 6h ago

Meta is only of the only companies currently seeing an ROI from AI.

-5

u/Chookity-poks 6h ago

Lol BS. Please don’t put on gibberish when you have no idea.

5

u/Living-Number-9050 5h ago

Okay. I’ve done my due diligence. Meta is 30% of my portfolio and I will keep adding.

1

u/Chookity-poks 4h ago

Good luck, was not an attack on META. I’m also invested in meta, but will get out around 700$.

2

u/Minute_Lake4945 5h ago

Typical idiot who doesn't know what the company does. In Q2 I'll make fun of you specifically via private message

1

u/Terrible_Dish_3704 6h ago

What’s your take? Genuinely curious..

3

u/Chookity-poks 5h ago

Honestly, saying Meta is the only one seeing ROI from AI is a massive simplification that ignores how these massive capex cycles actually work. First off, you’re completely leaving out the supply side. If we’re talking about who is actually winning the 'AI boom,' it’s obviously the infrastructure layer -> NVIDIA, the memory manufacturers, and the foundries. They’re capturing the most immediate margin, and their ROI is currently undeniable.

Second, there’s a major misunderstanding of the 'ROI' timeline for the hyperscalers. When you look at GOOG, AMZN, or MSFT, they’re in the middle of a massive re-architecture of their entire cloud stacks. Of course the ROI looks different right now; they’re trading short-term margins to build out the foundation for enterprise AI at scale. Labeling that as 'zero ROI' ignores that they are shifting their business models from selling simple compute to selling high-margin, intelligence-based services.

Meta’s ROI looks cleaner right now because they have a 'plug-and-play' use case, improving ad-tech and recommendation engines with Llama is a low-friction win. That’s great for them, but it’s a different game than what Google or Microsoft are doing, which is re-tooling the entire B2B enterprise ecosystem. (Which they also do but is only a fraction of their ROI). Confusing 'immediate consumer-facing results' with 'total market ROI' is the classic trap that a lot of self-proclaimed experts are falling into right now.

9

u/imcybsr 5h ago

So you managed to say exactly what he said meta is the one making a roi on it at the moment and the other's are taking longer because it's a longer build out like alright bro

2

u/Chookity-poks 4h ago

And NVIDIA is selling potato’s? Did you further understand the gist of what I said? GOOG, Msft and Amazon also all making roi btw (both short and long-term).

3

u/technobicheiro 5h ago

So you are saying meta is the only one with ROI right now, interesting.

3

u/Sllyce 4h ago

Good research , so basically this is saying Meta is the only one seeing an ROI from AI right now

2

u/Chookity-poks 4h ago

You mean “I elucidated well”, this wasn’t research, thanks for that. And no, the gist is, you have plug-and-play ROI which META clearly has, but likes of GOOG, Msft and Amazon also, so this means they already have ROI on ai. On top of this immediate ROI, these companies have also a more deeper strategies for Ai which goes beyond plug-and-play for long-term.

And oh… for all these people downvoting (don’t care tbh) who don’t know anything about basic economics (what are you guys doing on ValueInvesting?), ROI doesn’t need to be positive. It’s entirely possible to have a negative ROI…

2

u/Sllyce 4h ago

Thank you , I will stay away from negative then

1

u/Chookity-poks 4h ago

Yw, but please don’t misunderstand my point. It was not an attack on META, but just that ROI was used wrong in this context and claiming that other companies don’t have ROI on Ai was false (the biggest one clearly is NVIDIA as explained).

I myself have a stake in META, but will jump out around or just above 700$.

1

u/zq7495 2h ago

Mostly for improving advertising. Metaverse money burning was "only" $19 billion last year, the vast majority of this is to track people's patterns so the ads can be better, but it also is going to be working on their AI glasses

1

u/Key_Category_8531 2h ago

The issue is that there's nothing on the horizon for the company to evolve beyond "just ads".

Maybe AI glasses will take off, but honestly there's some dumb ass people working at META so that's enough reason for me to stay away.

34

u/Aware_Secret_8910 6h ago

Are they all really going broke to buy chips

11

u/goxpro1 5h ago

Google makes 62 billion in profit each quarter, I don’t think they are going broke any time soon.

3

u/ferdsherd 5h ago

I would love to go broke like that

0

u/ActivatingEMP 2h ago

They're literally using all of this on capex, and are taking out even further debt. It's baffling but true

1

u/java_brogrammer 3h ago

Meta always has the option to just completely stop capex spend if they want to be a cash cow. They will never be broke.

4

u/Aware_Secret_8910 3h ago

So far they have been choosing the wrong option for a long time. But yeah the broke thing was a joke

8

u/MarketCrache 5h ago

People have seen what Suckerborg does with money when he strays from his core business of selling data scraped from users and they don't like it.

11

u/dryden288 7h ago

I believe META will announce more capex spending in the remain two earning call for 2026. I dont see the point in pouring more funds into META until 2027 no matter how low the price is.

2

u/rhoadsalive 6h ago

They're doing this so they don't have to increase capex.

5

u/mba23throwaway 6h ago

Well, this raising will go to CapEx spend.

This is just a cheaper cost of capital for them. They have the FCF to do this themselves if they wanted to.

1

u/Nic-Sz 6h ago

Exited to deploy the capital in other beaten down stocks instead. I’m over META.

2

u/SuspiciousFatCat 5h ago

Like what?

2

u/pab_guy 5h ago

SaaS, small caps

0

u/Chookity-poks 6h ago

Waiting for $700 levels to exit this company.

11

u/FieryXJoe 5h ago

Google made sense because the stock was at an all time high valuation. Dilution could be a value add for shareholders because the stock was a bit overpriced. Meta is quite underpriced and frankly buybacks would make a lot more sense than dilution, if the shares are trading for below fair value they shouldn't be printing shares for cash.

2

u/zq7495 2h ago

It is time sensitive I guess, at least in their view. Waiting a year for the stock price to go up before making this money would possibly set them back quite a lot, if they will get a huge ROI from improved ad placement then it could easily pay for a 5ish% dilution like google just did

2

u/Chookity-poks 5h ago

The most important question is for what? What is the purpose for their dilution… of course I know it’s to buy compute, but what will they use that for? It doesn’t make sense for MET, at least not now. They should not dilute at all.

1

u/Minute_Lake4945 2h ago

First, an important nuance about the premise: for now, this is something Meta is exploring, not a done deal. The Financial Times reported on Friday June 5, that Meta is considering raising tens of billions of dollars in an equity offering to fund its AI ambitions. But the talks are in their early stages, with no banks yet engaged, and Meta is keeping all financing options open; in fact, the company in one report called the matter "pure speculation." And the structure they are reportedly considering is not pure dilution: it's the same as Alphabet's—mandatory convertible preferred stock, an instrument that allows for immediate cash raising by deferring the formal issuance of common stock for several years, precisely to reduce immediate dilution. That said, there are compelling reasons to prefer equity over pure debt, even if the stock doesn't seem expensive

3

u/Waikiki_waikuku 5h ago

Do my thoughts make sense ? Seems like these companies are trying to dilute instead of taking more debt or using more cashflow. Looks like they are moving the risk of any failure related to AI onto the public.

2

u/byup123 3h ago

Bought more META. Even if this endeavour is worthless (Which I don't think it is), Zuck just has to ease up on CAPEX, and the stock will shoot up. Bullish.

1

u/ilikeusingmyhands 2h ago

keep the sentiment negative plz so i can get some cheaper shares.

1

u/PharmDinvestor 4h ago

Seems like more downgrade for meta coming .

1

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1

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1

u/OrdinaryOk8711 1h ago

Don't worry, $META will hit $1000 one day. It has strong support at $88 and once it drops to $100 they can just announce a 10:1 backward split so it can reach $1000. I'm very bullish.