Tone
deaf: Mark Zuckerberg is a big problem for Meta
investors - November 2, 2022
Mark
Zuckerberg built Meta Platforms into one of the biggest
companies in the world, but some investors now see
him as an obstacle to the stock recovering from a
historic selloff.
The
Facebook parent has tumbled around 70 per cent this
year, with last weeks earnings pushing the shares
to their lowest since 2016. The biggest weight on
the stock: Meta is spending billions of dollars to
develop the metaverse, an immersive virtual world
that the chief executive officer has long believed
represents the future of computing.
The
strategy is curbing earnings even as the company acknowledges
its unlikely to deliver significant revenue
for years. While investors may long for Meta to renew
its focus on selling ads to its billions of social-media
users, the companys structure gives Zuckerberg
total control, so theres little they can do
but what theyve already been doing: sell.
Hes
tone deaf to what the owners of the company want,
outside of himself, said David Katz, chief investment
officer at Matrix Asset Advisors. The stock
could double in a year with better management, with
management that is more focused on shareholders.
Despite
these issues, Katz views the stock as dirt cheap,
and said that on a longer time horizon, if youre
willing to hold your nose, I think theres a
great likelihood that Meta will be significantly higher
than it is today.
Zuckerberg
owns or controls about 90 per cent of the companys
unlisted Class B shares, which have 10 votes each
versus one vote each for the Class A shares that are
publicly traded.
The
structure prevents activists from influencing the
board and management, something that has happened
with big tech in the past. In 2014, Carl Icahn pushed
for Apple to accelerate its buyback program as a way
of pushing up the stock price.
Asked
about Zuckerbergs control, a Meta spokesman
referred to the companys 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 established
a track record of creating value for our shareholders
and navigating important opportunities and challenges.
The companys investments to improve privacy
and safety 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 Alphabet,
Paramount Global, and Comcast.
Zuckerbergs
stake means he has been hit especially hard by the
stocks collapse. Over the past 13 months, his
total wealth loss has exceeded $US100 billion ($156
billion). His apparent willingness to stomach such
losses is a sign of his faith in the metaverse, and
if the bet does play out, investors may one day look
back with relief that Zuckerberg wasnt forced
to change course.
Zuckerberg
deserves the benefit of the doubt, said Mark Iong,
a fund manager at Homestead Advisers.
He
took Facebook public when it had huge margins, so
he clearly cares about making money. He waited years
to monetise WhatsApp, so hes clearly patient.
And he bought Instagram early, so hes clearly
smart, he said. I think hes earned
the right to pursue this long-term strategy.
(Bloomberg)
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