Meta's $95 Billion Stock Sale Could Dilute Investors by 5.9%

By Amara Osei

Meta Platforms announced on Oct. 22 a set of common and mandatorily convertible preferred stock offerings to raise as much as $95 billion — a move that could add roughly 5.9% to its share count and dilute existing investors without them lifting a finger.

Back-of-the-envelope math based on Meta's closing price of $621.03 on Tuesday puts that $95 billion at 152,971,676 new shares, equal to 5.9% of the company's third-quarter average diluted share count of 2.573 billion. If a share count rises 5.9%, earnings per share falls 5.6%, all things being equal. The preferred shares convert to common shares in August 2029, stacking further dilution onto the total.

Why are hyperscalers issuing stock now?

The giants known as hyperscalers may be tempted to issue more shares as interest rates rise and the stock market holds up. Raising equity funds expansion without adding debt — attractive when capital markets are scrambling to finance the artificial intelligence infrastructure buildout.

Dilution is the lowering of an investor's ownership percentage when a company issues common stock to raise money for expansion, pay for an acquisition, or hand shares to executives as compensation. It raises the share count and lowers EPS. Buybacks do the reverse.

A rising share count isn't necessarily bad. The money raised might fund lucrative long-term expansion. But investors should track it, especially when companies issue shares for compensation while buying back stock at the same time.

When a company says it is "returning capital to shareholders" through buybacks, that's not necessarily true. Dividends genuinely return investors' money. Buybacks deploy capital to buy shares from people who no longer wish to be owners — and sometimes merely offset dilution from employee pay packages. When buybacks outweigh issuances, you get net buybacks, which lower the share count and raise EPS.

Which S&P 500 giants are diluting most?

Among the 10 largest S&P 500 companies, Alphabet showed the highest one-year dilution of its common share count through Sept. 30 — a reversal of its long-term shrinking-share trend.

The company began this funding wave in the second quarter, raising $49.6 billion through combined common and mandatorily convertible stock offerings. It followed with another $12.4 billion raised in the third quarter via common shares. Alphabet said it planned to use the money to help fund the buildout of AI infrastructure and computing power.

FactSet data on quarterly average diluted share counts shows the split picture across the top 10 by market cap:

• Apple: share count down 32.2% over 10 years; market cap $4,844 billion
• Nvidia: down 4.2% over 10 years; market cap $4,981 billion
• Microsoft: down 5.5% over 10 years; market cap $3,869 billion
• Amazon: up 12.7% over 10 years; market cap $2,711 billion
• Alphabet: down 11.5% over 10 years despite recent issuance; market cap $1,643 billion
• Broadcom: up 16.6% over 10 years — the largest three- and five-year increases on the list; market cap $1,585 billion
• Tesla: up 50.4% over 10 years, the biggest decade-long gain; market cap $1,575 billion
• Meta: flat year-over-year in Q3, down 12.2% over 10 years; market cap $1,375 billion
• Eli Lilly: down 15.8% over 10 years; market cap $1,326 billion
• Walmart: down 14.7% over 10 years; market cap $991 billion

What makes Apple's buybacks different?

Apple dominates the net-buyback story. It has spent a combined $769.32 billion on share repurchases over the past decade, according to FactSet. The compounding effect is striking: that 32.3% share-count decline has boosted Apple's EPS by 47.5%, all else equal.

Warren Buffett, former Berkshire Hathaway CEO who remains on the company's board, laid out his buyback standard in his 2019 shareholder letter: "Berkshire will buy back its stock only if a) Charlie and I believe that it is selling for less than it is worth and b) the company, upon completing the repurchase, is left with ample cash." He was referring to the late Charlie Munger, then Berkshire's vice chairman.

Buffett also warned against propping up a stock price: "If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares. We will not, however, prop the stock at any level." Companies can overspend on buybacks, repurchasing shares even when they trade at historically high levels relative to earnings, cash flow or book value.

In his 2021 letter, Buffett cited Berkshire's Apple stake, which grew to 5.55% at the end of 2021 from 5.39% a year earlier. "That increase sounds like small potatoes. But consider that each 0.1% of Apple's 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple's repurchases did the job," he wrote.

What should investors take from the data?

Stock issuances can be good or bad, and the same goes for buybacks. Investors need to watch both. The issuance spikes at Alphabet and Meta, and Apple's decade-long buyback discipline, offer the clearest signals for judging whether management is growing value or shrinking your slice of it as AI spending accelerates.