Key Points
-
Meta priced 40 million Class A shares at $625 each in a common stock offering it upped to $25 billion.
-
A concurrent sale of mandatory convertible preferred stock pulls in around $12.5 billion more.
-
Meta’s capital spending outran the cash its operations produced in the third quarter.
-
Meta Platforms (NASDAQ:META) just asked investors for lots of money. The social media giant priced 40 million Class A shares at $625 apiece on Oct. 26, a $25 billion sale. It also priced 250 million depositary shares of mandatory convertible preferred stock at $50 each, worth another $12.5 billion.
All told, Meta is raising about $37.5 billion in new equity, after spending $26.2 billion buying back its own stock in 2025. And the stock trades near $625 as I write this, over 20% below its all-time closing high of $790, set in August 2025.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
But is the cost of all the new shares worth what the money buys? I think the cost is lower than the $37.5 billion number makes it look.
Image source: Getty Images.
A raise in two parts
Meta won’t get the common stock money right away. Under forward sale agreements with Morgan Stanley and Goldman Sachs, it issues the new shares and collects the roughly $24.9 billion in net proceeds once the agreements settle, which Meta expects by Nov. 19, 2027.
The preferred stock pays a 6.5% annual dividend, or around $813 million a year. In August 2029, each depositary share converts into 0.0681 to 0.0800 Meta shares, based on the stock’s price then, before adjustment for a planned Class C stock dividend.
Meta plans to use the cash for general corporate purposes. But its Oct. 21 earnings release said the investment needed “to compete, sustain growth, expand infrastructure, and pursue new strategic initiatives” during the industry’s move to artificial intelligence (AI) “is significant.”
What does it cost shareholders?
Meta had around 2.56 billion Class A and Class B shares on Sept. 30. The 40 million new common shares, plus the 17 million to 20 million shares the preferred stock could convert into, would add around 2.2% to 2.3% to that count.
That’s on top of a slower climb. Without buybacks since the third quarter of 2025, Meta’s average number of shares outstanding has grown in four straight quarters, by 8 million to 9 million shares every time. It hit 2,552 million in the third quarter of 2026, up around 1.4% year over year.
Around 2.3% more shares means each share’s piece of future profits shrinks by a little over 2%. At around $625, the stock trades at about 18 times expected 2027 earnings. With those profits spread across the higher share count, the price-to-earnings ratio would still be under 19 times earnings — even if the new money never added a dollar of profit.
Spending has outrun the cash
In the third quarter, Meta spent around $2.1 billion more on capital expenditures (including principal payments on finance leases) than its operations took in. A year before, operations covered the spending with around $10.6 billion left over. And management expects 2026 capital expenditures of $135 billion to $145 billion.
Meta has also borrowed heavily, raising about $29.9 billion of long-term debt in the fourth quarter of 2025 and $24.9 billion more in the second quarter of 2026. By Sept. 30, long-term debt had hit $80.9 billion, almost matching Meta’s $82.5 billion of cash and marketable securities.
I’d say selling stock makes more sense for Meta today than adding more debt.
And the spending seems to be paying off in the core business. Advertising revenue climbed 26% year over year to $63.1 billion in the third quarter. The same release said its AI investments “are already delivering substantial incremental advertising revenue.”
This might not be the last raise. Meta also plans an at-the-market program to sell around $60 billion more stock after its new Class C shares start trading, but it hasn’t set the timing. At today’s price, that would be close to another 4% of the company.
Big buyers paid close to today’s price
Meta priced the common stock less than 1% under the $630.56 last sale price on Oct. 26, after increasing the sale from the $22.5 billion it first announced. Nvidia said it would invest $3 billion in Meta’s equity offering.
The preferred buyers gave up some upside. In return for the 6.5% dividend, they take the stock’s losses under $625. But they don’t share in any gains until Meta passes about $734, about 17.5% over the offering price. These terms suggest they see today’s price as a sensible spot to own Meta.
Is Meta stock a buy near $625? I think so. True, giving up a little over 2% of the company costs existing holders something, and the planned $60 billion program might take more. But the cash comes to more than Meta spent on capital expenditures in the third quarter, while its ad sales are still rising more than 20%.
I’d consider buying shares at about the same price Meta’s new investors just paid.
Should you buy stock in Meta Platforms right now?
Before you buy stock in Meta Platforms, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $337,166!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,339,143!*
Now, it’s worth noting Stock Advisor’s total average return is 904% — a market-crushing outperformance compared to 213% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of October 28, 2026.
Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Nvidia. The Motley Fool has a disclosure policy.
