Mark Zuckerberg built Meta Platforms Inc. into one of the largest companies in the world, but some investors now see it as an obstacle.
Mark Zuckerberg built Meta Platforms Inc. is one of the largest companies in the world, but some investors now see it as an obstacle to the stock’s recovery from a historic sell-off.
Facebook’s parent company is down 72% this year, with last week’s gains pushing the stock to a multi-year low. Biggest weight on the share: Meta spends billions of dollars developing the metaverse, an immersive virtual world that the chief executive officer long believed to represent the future of computing.
Shares fell 6.1% on Monday, ending at their lowest point since October 2015 as it led to a broad decline for technology and internet stocks. The Nasdaq 100 index fell 1.2%.
The strategy is holding back profits, even as the company recognizes that it is unlikely to generate significant revenue for years to come. While investors may want Meta to refocus on selling ads to its billions of social media users, the structure of the company gives Zuckerberg total control, so there’s little they can do other than what they already did: sell.
“He is deaf to what the owners of the company want outside of themselves,” said David Katz, chief investment officer at Matrix Asset Advisors. “Stock could double in a year with better management, with management more focused on shareholders.”
Despite these issues, Katz considers the stock “dirt cheap” and said that “on a longer time horizon, if you’re willing to hold your nose, I think there’s a good chance Meta will be significantly higher than it is now.” .”
Zuckerberg owns or controls approximately 90% of the company’s privately held Class B shares, which have 10 votes each, versus one vote for the Class A shares that are publicly traded.
The structure prevents activists from influencing governance and management, something that has happened to big tech in the past. In 2014, Carl Icahn pushed for Apple Inc. to accelerate its buyback program as a way to drive the stock price up.
When asked about Zuckerberg’s control, a Meta spokesperson referred to the company’s proxy statement, which reads: “We believe that our capital structure is in the best interests of our shareholders and that our current corporate governance structure is sound and effective. ”
Under Zuckerberg, the statement adds, “We have built a track record of creating value for our shareholders and navigating key opportunities and challenges.” The company’s investments to improve privacy and security “may not have been possible if our board of directors and CEO were focused on short-term success over the long-term interests of our community and our company.”
In the S&P 500, 33 companies have unequal voting rights similar to those at Meta, according to ISS Corporate Solutions, including Google parent company Alphabet Inc., Paramount Global and Comcast Corp.
Zuckerberg’s bet means he has been hit particularly hard by the stock’s collapse. In the past 13 months, his total capital loss has exceeded $100 billion. His apparent willingness to handle such losses is a sign of his confidence in the metaverse, and if the bet comes true, investors may one day look back with relief that Zuckerberg wasn’t forced to change course.
Zuckerberg deserves the benefit of the doubt, says Mark Iong, fund manager at Homestead Advisers.
“He made Facebook public when it had huge margins, so he clearly cares about making money. He waited years to make money from WhatsApp, so he’s clearly patient. And he bought Instagram early, so obviously he’s smart,” he said. . “I think he has earned the right to pursue this long-term strategy.”