People act like Meta is going under because their free cash flow went from $8B to $4B in a year when they've faced headwinds from Apple's new privacy policy and the economy overall.
As far as I can tell the company is in perfectly fine financial health.
The market is essentially betting that Meta is headed in the wrong direction to increase profits over the near term. I think Zuck might actually agree with them.
Apple pays a dividend. Microsoft pays a dividend. Most mature companies do.
When a company has cash that it can't invest as profitably as its shareholders could do on their own, it's obligated to pay it to them as a dividend. It's their money.
Of course, Zuckerberg would rather flush it down the toilet and call it "innovation." The stock market is voting No on that.
Apple paying dividends is a relatively new thing. It never did under Jobs. He was adamantly against it. Adobe doesn’t, Alphabet doesn’t Netflix doesn’t.
Bit of a curveball mention of Warren and Sanders there, the latter of whom is certainly focused on what he sees as far bigger issues.
But the Norwegian Sovereign Wealth Fund, which he has mentioned favorably as a potential model for the US, does recommend against investing in companies with these types of share arrangements unless they have a sunset date (their analysis is that there is a benefit to giving founders control but that it diminishes and becomes a detriment over time). Matt Bruenig/People’s Policy Project has written on the topic also.
Thanks. It's certainly a flaw in capitalism, isn't it? A founder wants the public's money, but doesn't want them to exercise ownership.
There are lots of private companies. Going public is not the only way to get liquidity. So I would say, as John Q. Investor, "If you get my money, I get to vote to fire you."
To be perfectly honest, by saying "curveball" I wasn't complimenting your reference to them, I was saying it was unexpected and confusing (as in hard to comprehend how or why you arrived at it).
Even though Meta doesn't issue dividends, they did do massive share buybacks last year. That effectively returns cash on hand to investors, much as dividends do. (Of course, Meta's buybacks are also to offset stock based compensation, but on net, it still represents a return of cash to investors.)
> When a company has cash that it can't invest as profitably as its shareholders could do on their own, it's obligated to pay it to them as a dividend. It's their money.
I'd love to see a source for this. What is the precise nature of this obligation, and who enforces it?
Publicly-traded companies are expected to act in the best interest of their shareholders, which includes the obligation to make the best use of free cash. This is Business Law 101.
Management is generally given huge leeway here and shareholders will usually vote with their feet as has happened with Meta.
> When a company has cash that it can't invest as profitably as its shareholders could do on their own, it's obligated to pay it to them as a dividend.
Aside from, as far as I know, not being any kind of legal obligation... I don't see how that situation would ever even come into effect if it was.
What kind of investment opportunity is going to turn down cash from a company (especially one the size of Facebook/Meta) but welcome it from most/all of their investors?
There are very large funds that focus on tech. And since tech has gotten so big relative to the market, even if a fund doesn't specialize in it, they still have to understand it.
Since they have so much money at stake, they have an interest in understanding it. Not doing so will cost them their jobs.
"Understanding" is "in the financial sense" of course. They mostly care about the volumes of money going in and out, and expectations for that.
Yeah but as individuals, you don't not buy a etf (generally) b/c you don't like a single company. If you think tech or growth will do well you'll buy a tech etf...
Companies are valued based on future cash flows. A stable company typically has a P/E ratio of 20. Meta’s is around 10, which is an indication the market believes profits will cut in half and then stabilize.
This is a 5% earnings yield. That's a whopping 99 basis points ahead of the 1-year rate and 103 north of the 6-month [1]. One can adjust for growth [2]. But a neutral 20x multiple is not a fact of nature.
> the market believes profits will cut in half and then stabilize.
This isn’t true. The market believes Meta will still grow, just slower than before. If they believe growth is zero, as you indicate with “stabilize”, their PE ratio will plummet even further.
The title of the article is "Since becoming Meta, Facebook’s parent company has lost US$650 billion" and this was previously also the title on HN. The comment was a response to that.
In what universe are stock investments not equivalent to cash, for nearly all investors? You buy, you sell, same as forex or gold or turnips.
This is real-life loss of value. Saying it's "paper value" makes as much sense as saying the money in your bank account isn't cash because it's just "numbers of a screen".
I'm astonished that somebody could think stock losses are somehow less harmful than losing cash. That's just wrong.
The almost universal advice before buying stocks is that it's only good for the long term, because at any particular moment it might lose its value.
It is always stressed that you shouldn't use money to buy stocks if you might need that money in the next ten years. It is also recommended to move money from stocks to a safer instrument as you get closer to needing to use it.
I mean, the universal advice is also not to hold too much cash because it gets eaten away by inflation.
But none of this has any relevance to the fact that, for immediate spending purposes, cash and liquid publicly traded stocks are identical.
It utterly irrelevant whether you "should" only hold stocks for money you don't think you'll need for 10 years (which is highly debatable, and day traders certainly disagree). The point is, if you need the money next week, your stocks and your cash are identical. That's all that matters.
If we're talking about liquidity in publicly traded companies, the kind average people are investing in, that doesn't matter for any practical purposes.
You might as well say there are big differences in ATM fees depending on where you withdraw money, and it varies by bank.
But that's not the point. These tiny details are utterly irrelevant to the fact that stock value is as real as cash. It's not "paper value" where gains and losses are somehow imaginary or don't count.
>the fact that stock value is as real as cash. It's not "paper value" where gains and losses are somehow imaginary or don't count.
Sure, but what is also real is that nominal equity prices can go up or down at anytime, whereas the nominal amounts of cash should not.
When VOO price goes down, I think of that as a very different loss than if my checking/savings account balance were to have gone down without me withdrawing from it.
One should not expect nominal equity prices to be a certain number, or a certain minimum number, especially single stocks. It is paper value, as far as I am concerned.
Well you shouldn't. Your net worth is measurably different because it's all liquid. It's a cognitive illusion if you're thinking of them any differently. And if you're making a big financial decision like whether you can afford a bigger house, I sure hope you're treating them the same.
And at the end of the day even the nominal value of cash isn't what matters -- it's the real value. Inflation and even currency fluctuation change the real value of what your cash can purchase daily, so the value of your cash is changing too. (The only difference is that cash fluctuations are usually slower and more gradual, and that contracts about future payments are generally denominated in currency rather than equity, but of course not always.)
> And if you're making a big financial decision like whether you can afford a bigger house, I sure hope you're treating them the same.
On the contrary, I would suggest most people ignore their equity such as stock when considering whether or not they can afford a mortgage for the very reason of this thread title.
> And at the end of the day even the nominal value of cash isn't what matters -- it's the real value.
I prefer to use the term “purchasing power” rather than “real value”, but I agree with this.
>Inflation and even currency fluctuation change the real value of what your cash can purchase daily, so the value of your cash is changing too.
Correct, which is why buy equity such as stock or broad market ETF. I think the purchasing power of the equity will be higher than cash sufficiently far into the future.
But I do not see the point of worrying about decreases in equity prices in the near future long before I plan on selling. I guess there is no right or wrong, but I feel like worrying about short term changes in price is how people actually lose money by selling low and bugging high, rather than just buying and holding.
> I would suggest most people ignore their equity such as stock
So you're saying... when people make a housing purchase decision... they should ignore the value of their savings?
I'm sorry but that's one of the dumbest things I've ever heard. Stocks are savings, they're investments, they're net worth, and treating them as if their value doesn't factor into your financial decisions is utterly nonsensical.
> But it does not help me to pay attention to prices today or the short term.
It sure does if you need to sell some stocks to finance a purchase today. Because you know when people take money to put a down payment on a mortgage? That comes from savings. And savings should be invested in a diverse set of holdings... that includes stocks.
I can see you're holding stocks for the long-term. That's fine and a valid investment decision. But something might happen where you have to dip into them tomorrow. And I can guarantee you, you're going to suddenly be very concerned about a decrease in the value of your equities. And that's the whole point. They're not made-up funny money. They're value as real as cash.
> So you're saying... when people make a housing purchase decision... they should ignore the value of their savings?
No, I wrote they should ignore non cash or near cash holdings for the purposes of determining how much of a mortgage they can afford.
> Because you know when people take money to put a down payment on a mortgage? That comes from savings. And savings should be invested in a diverse set of holdings... that includes stocks.
Savings that are needed in the short term should not be invested in stocks, or other non liquid and/or volatile assets.
> But something might happen where you have to dip into them tomorrow.
This should only be in the utmost emergency scenarios. Ideally, one has sufficient cash or cash equivalent securities for at least a couple years of expenses. Or at least that is my philosophy.
This is all just your personal financial philosophy which, I'm sorry, is utterly irrelevant to the question at hand.
The point is, liquid stocks (regular publicly traded companies) are not "paper" value that are then somehow different when you go to sell them. They're the same as cash in terms of actual spendable wealth, they just take a couple of days to settle is the only difference -- but that's time, not value. And so when stocks drop like Meta, you've lost real actual wealth. Not in an imaginary "paper" sense or "paper value" as you say, but in a real, "I have less resulting cold hard cash when I cash out" way.
And anyone who says otherwise just doesn't know what they're talking about. This doesn't have anything to do with your investing philosophy, it's just the definition of how stocks and cash work.
If “in these years” means possibly needing to sell within 0 to 5 years, then safer would be USD, short term treasures, I bonds, muni bonds, AAA corporate bonds (or correspondence bond ETFs), etc.
No they don't, not if they have to spend the money now -- like on a down payment for a house.
There is literally no difference in wealth between losing $100K in cash or in stock, assuming the stock is liquid. They are equally "real", 100%.
And the wealth effect has literally nothing to do with this.
(Fine print: assuming your stock is no more than a small fraction of any specific company, and that these might have different effects on taxes. But the general point stands.)
That doesn't make any sense and has nothing to do with the discussion at hand.
But if you need to spend the money now, you sell the stocks now so they become cash, which means the stock value is identical to the cash value. That's the whole point. There's no difference between "paper value" and cash value. They're the same.
I mean it might take a couple of days for the trade to settle so you can wire it, but that not the point. The value is just as instantaneous and liquid as cash for all practical purposes, for publicly traded companies generally.
I'm not so sure about that; FB hasn't traded in this range since mid-2015, doesn't pay dividends and hasn't had any splits. Also, USD today is worth ~20% less in real terms today than it was in 2015
Facebook IPO'd in 2012. The stock is down to its price in October 2015. There are a few people who own lots of shares obtained before October 2015, and they are up. There are probably more people who own a few shares obtained after October 2015, and they are down.
Equity in Meta is liquid net worth, unless you're a materially important share holder. The stocks you hold right now can be converted into cash easy at any point in time. In what world is that nearly equivalent to cash?
The headline is disingenuous given the overall market decline. No doubt the Meta decision was a massive drag on Facebook. It would be interesting though to see an estimate of the loss due to poor management / vision, vs other factors.
Also, (as someone who thinks Meta - by which I mean the metaverse - is stupid) I want to defend Facebook and say that doing nothing would also have made them quickly irrelevant. It's not like they could have rested on their laurels and expected FB and IG to be long term drivers of their stock valuation. Meta was imo a poor direction, but it was a direction, which is better than nothing
"Meta was imo a poor direction, but it was a direction, which is better than nothing "
Facebook makes money by advertising. Apple closed the ability to track users over to 3rd party advertisers. Facebook is losing advertising money. Meta is just some ridiculous non issue. The problem is fundamental. They are losing the ability to give advertisers value. Put on all the meta head sets you want, but, FB needs to dig in and get a solution to advertiser tracking. [I am open to hire lol]
Fuck. That. The "solution to advertiser tracking" is surreptitiously tracking people all across the internet without their informed consent. And when Apple's policy change required informed consent, surprise surprise, people also said "Fuck That".
Facebook has tons of data from their own sites to build extremely detailed profiles of individuals to target advertising to them. If they can't build a profitable advertising business with that information, they deserve to die.
I think there's too much stock in the Apple closing off their tracking and somehow advertisers stopped using their ads. That privacy control started in iOS 14.5 in April 2021 and I'm sure it's had some effect but I think it's overblown.
They didn't need the metaverse, but they did need some sort of new direction; buying out nascent social networks was a stall tactic to prolong the time before they became uncool with the hip youths.
I don't think it's too far of a stretch to say that Zuckerberg read Snow Crash as a teenager, loved it, and either missed the punk ethos or edited it out of his memory when he found himself in a position of respectable authority.
"unforced error" and "forced error" already are sports jargon (baseball) and from context "unforced error" must have been intended, which is similar to "own goal" but doesn't imply points being scored. (It's not possible for the defending team to score against itself in baseball anyway, so "own goal" would never really be applicable... though actually the pitcher can walk a run in, I guess that's like an own goal!)
Baseball just has "errors." Tennis has "unforced errors." American football has fumbles, interceptions, safeties, and lots of ways to draw a penalty. I'm probably leaving out other bad things you can do, too (hiking it over the punter's head, or stepping out of bounds, for instance).
I think if we're using it in a non-sports context, "own goal" and "unforced error" are both appropriate.
I thought they were using tennis analogy, where player hitting the ball out or on the net without being forced to by the opponent counts as an unforced error.
Baseball doesn't distinguish between forced and unforced errors: a ball put in play that results in a baserunner is either a hit or an error. The forced/unforced distinction comes from tennis as far as I know.
The hysteria around Meta earnings report has been really fascinating to watch. Starting most recently with the activist letter telling Meta to give up on the Metaverse.
The market hates innovation - until its successful, then loves it. Meta making such a big bet on the future, win or lose, is inspiring.
> The market hates innovation - until its successful, then loves it.
What are you even talking about? Huge VC funding is predicated entirely on innovation before proving success. The market loves innovation... when it actually makes some kind of coherent sense.
> Meta making such a big bet on the future, win or lose, is inspiring
No it's not inspiring, it's idiotic. That's like saying "I bet my house and my kids' college money on a new crypto coin, but win or lose, it's inspiring!" It's not inspiring, it's just irresponsible.
Best comment I saw on this was it's like trying to reinvent VR.
We already have VR. Incrementally, maybe there will be some sort of popular VR chat down the road, but it's just too expensive at this point for mass adoption. The distance between getting a Twitter account and hopping on the Metaverse is over $500.
The idea of putting on a headset and "experiencing" a "chat" is a downright Lovecraftian dystopia that I want no part of - and I work in tech. Maybe it's the proximity to hardware that makes me so hostile to the idea, but I cannot for the life of me imagine doing that voluntarily. And thus I have to imagine that it wouldn't be voluntary if it becomes mainstream. "Everyone needs a facebook" becomes "everyone needs an Oculus" and so on. That it's $500 is a minor aspect of this.
I'm not entirely sure this is entirely true anymore:
> The idea of putting on a headset and "experiencing" a "chat" is a downright Lovecraftian dystopia
For the record, I fully believe that to be accurate for headsets. But how about fully immersive, 270°-by-270° viewport VR helmets? I've just come back from a beach holiday, and the thing that struck me was how many children were using snorkeling helmets. Not snorkels and goggles, but full-on helmets with a builtin snorkel jutting out on top. If kids can find such devices comfortable for making their swimming and light diving experience easier, then from a form factor point of view, a VR device going the same route might not be an entirely impossible thing.
The tech sure isn't there yet. And from a latency point of view, may never[0] become a reality. But a device around one's head appears not to be unthinkable.
0: I don't know how many milliseconds of visual latency a human brain can tolerate before breaking the immersion and/or giving the user a headache, but I suspect it's in single digits. Getting to those kinds of refresh rates, the display bandwidth demands would be insane. Possibly beyond what's physically possible.
"Lovecraftian dystopia" has to be hyperbole. I remember similar comments before cell phones became popular. No one can just go down to the river watch the water flow anymore! They always have to be on their phones!
Parent commenter was clearly referring to the investment market, since the entire subject is a fall in stock price. Crossing the chasm has nothing to do with the investment market.
> activist letter telling Meta to give up on the Metaverse
I assumed it were some users who came up with that letter, but a quick google search indeed revealed it was investors. That wasn't clear to me and you are indeed correct.
I think you just disproved yourself. The market does hate innovation. That’s why there’s this big unmet need for funding innovation the VCs step in to fill. The market has left money on the table and VCs since they are private money, can pick up the money in huge average multiples across a portfolio.
I don't know what you think "the market" is, but VC investment is part of it.
Perhaps you're confusing the market with the "public market", publicly held companies? But the private market is very much part of the market. Nobody's leaving money on the table, that doesn't even make any sense.
The US mobile app market is now an effective monopoly that can charge as much commission as Cupertino wants and enforce whatever policy Cupertino prefers.
Google has its playstore to sell freely its services.
The only policy that was detrimental to Facebook was to have the shocking audacity to, gasp, ask for a user's permission before tracking them on every other app and website. And, shockingly, nearly everybody said "No, I don't want to be tracked everywhere."
Facebook's business model deserves to die if that's the policy that kills it.
Apple calls this "personalized ads" when they do it, and "tracking" when FB does. They're the good guys(TM), so it must be true. It is no wonder why Zuck wants to own a platform.
Apple is not protecting anyone's data - they are using data for themselves. They are exempted from their own terms and they are expanding selling ads. U r just changing the different overlords. I wish more people could understand this and I would rather choose Google in this regard
As long as Apple can make more money selling devices and subscriptions than from ads I'd trust them 10x more than Google or FB. If there is credible competition and Apple continues to position itself as the 'privacy' option I don't think it really makes sense for them to shift towards Ads too much, they'd just lose customers and there is more $ in iPhones anyway.
Now if Apple actually becomes a virtual monopoly or it's the opposite and they have to cut their margins it's a quite different picture.
But they are doing exact what android is doing. U can't op out of apple's collection, u can only choose to not do personalized ads - just like google. And when android is conversation, we already know how it works but why do we have to sugar coat this when dealing with apple?
Apple's $30bn practically guarantees they never cared about your privacy - they simply wanted to supplant Meta in the adtech space and get a chunk of that sweet, sweet revenue.
Do you really think this is an efficient allocation of resources? Here's a thought: Zuckerberg is worth $30 to 40bn [1]. Let's take $10bn of that and let Zuckerberg personally invest that in start-ups. Which team do you think will innovate more? Facebook burning ten times that? Or $10bn fronting founders?
Yes but Horizon Worlds is literally the "metaverse" that they named the whole company after. That's the flagship product it's all for. It's not some accessory app, it's the main thing.
Not really. The Second Life wanna be app is a bonus if it becomes popular. Just like Safari and other Apple apps on iOS. Meta bet it's VR ecosystem will become the next iPhone/ios ecosystem(hardware and software). So if someone builds a "killer" app on Oculus Meta wins anyway.
Mark's metaverse is very specifically a shared virtual physical environment. Yes you're going to pay to enter spaces and have experiences and buy clothing... but Horizon Worlds isn't an app on the platform. It is the platform, it is the metaverse, everything is happening within it in Mark's vision here.
Yes, an app on a platform that isn't the metaverse.
The Quest operating system, and the Meta app store, are obviously not the metaverse... the metaverse is a universe of shared 3D spaces. That's Horizon Worlds. The spaces are the "worlds".
I don't know man, this all sounds very rambling and circuitous. I was replying to your comment saying "but Horizon Worlds isn't an app on the platform" which is blatantly wrong.
I can definitely see how you can spend lots of resources building a new platform. I could spend years developing/interating over a "simple" cms. Big projects such VR are hard to get right. It's both a hardware and software problem and Zuck's timming may not work in his favor(he may be too early on VR)
I love that you use the word hysteria, which has a long history of misuse. The fall in value is entirely justified - Meta has sucked for a while, has no moat, and has begun its slow slide into irrelevance like myspace etc before it. In addition revenue is down everywhere due to the coming recession and at ad-driven companies most of all. This will continue for a while.
As to the bet on a metaverse, this idea comes from the 80s, and Meta has executed remarkably poorly on it - who can forget the legless avatars. Not even their own employees want to use it:
Meta has spent $30 billion on Reality Labs so far.
To put that in perspective, I’ve seen an estimated cost of setting up a small colony on Mars to be that much.
Even to get a conservative 10% ROI (super low for the level of risk they are taking), they’d need to net $3 billion a year. I can’t think of any scenario where that is possible any time soon.
The market has never hated innovation. Very much the opposite. What do you think Growth stocks are (i.e. valued on innovation/future potential) vs Value stocks (valued on more intrinsic/today's value).
The market hates not being sold on a story. And honestly Zuckerberg completely failed to sell the public on the metaverse.
We've had VR worlds for a decade plus. Noone used them. Horizon Worlds is the same thing, but monetized. And extremely expensive to build for some odd reason and with basically no users.
Large public companies aren't innovators. Innovations requires risk. Meta is a huge part of retirement portfolios and pensions, which are extremely risk averse. There is an expectation that the company is going to do an efficient job at extracting profits. If Meta isn't meeting that expectation, the market reaction is to be expected .
Yeah, the traditional move for a company of Facebook's size would be to pivot from a growth play to a value play, and focus on value extraction. Perhaps even - gasp! - pay dividends. This would have been a lot more appealing to the big insto funds and potentially bouyed the share price.
The current plunge we're seeing is a vote of no confidence from the market.
> The market hates innovation - until its successful, then loves it.
Debatable. ARK's Tesla forecasts lean heavily on robotaxi revenue and value creation. The valuation to private investors in SpaceX depends very heavily on Starlink becoming a global telecom giant because rockets by themselves would never be so valued.
Without that belief in a future, those companies would be worth far far less. What happened to Meta is that the potential of the metaverse turned out to be way too similar to a second Second Life. As long as Starlink isn't perceived as a second Iridium, it will have access to cheap capital.
Meta is not “Mark’s company”. It’s publicly traded and has millions of shareholders who do not support this silliness. For now, the main reaction is to sell (leading to the valuation drop).
this is misleading, market cap isn't the same thing as net profit. if anything, the massive loss in market cap makes meta a way better investment now than it was before it "lost $650B" because the p/e ratio went down below historical averages (it's 9.46 now, historical average p/e ratio is like 13-15 iirc)
Investing in Meta is saying you believe Mark Z has some kind of edge or grand vision to keep their platforms relevant that he hasn't shown the world yet. What do you think that is? What do you know that the market doesn't?
Everyone jacked into their VT headsets, living from their couches, not leaving the house in a fossil fueled vehicle or recreating in a fossil fueled boat is maybe what our planet desperately needs
Market lacks the understanding of most of the new tech. It's been like that for decades. Apple stock is a great example, some of them tried to bankrupt Tesla with shorting and uber (as a bad) and many other new tech IPOs. I think it's all because of many old fund managers with double digit B. or more funds, lack of understanding many details about todays web tech.
Uber has basically given up on self driving, is losing money, now has more competitors and is still charging less than its suppliers real costs in most markets. It's really not clear we won't be having the conversation going on about meta today about uber in 5 years. Maybe worse, since meta at least makes a profit
XR is the future, sure, but it's missing the killer app that convinces people to shell out for it. We're talking a lot about market value here, if people don't want it then it isn't creating any value for them. Maybe we should focus on actually creating some value before we try to leapfrog too many levels of technology?
The people who held all the stock have lost a combined 650B since that date. It may be a better investment now - but 650B was literally lost by these folks.
There has to be another party on the other side of every trade. If someone wants to sell Meta stock for $300, there needs to be someone who wants to buy it for $300.
Exchanges have a collection of their participant's bids ("I will buy for this price") and offers ("I will sell for this price"). When a bid is matched with an offer, the transaction goes through.
Now this is the important part - there are only so many people willing to buy for $300. If there is a mass sell off, all those offers are consumed, and the exchange starts filling the offers of people who would buy for $299.99 (or whatever the next lowest price is). Once those offers are consumed, further down the price ladder we go.
That alone will ensure that not all sellers are getting top dollar, however a market selloff like that would trigger a cascade of lower prices (buyers withdrawing their bids and relisting at a lower price, or not relisting at all), along with things like stop losses and algorithms getting triggered.
That's a different scenario. The previous comment said:
> If they all tried to exit at the top
Assuming that "they all" means "the vast majority of shareholders", then sell pressure would be higher than buy pressure by definition, and the price would drop.
If there was enough buy pressure to absorb the sell pressure, then we're in a scenario where half or less of the shareholders are trying to exit.
There would not be enough buyers. If there were you would have an absurd situation where there is 650bn chasing the shares at that price based on the same public information that is making the “Other half” want to sell everything at that price. That might be possible with more “rigged” markets like cryptocurrency shitcoins. But I can’t see it is possible here.
I agree that the shareholders would never actually all sell in unison without there being some motivating force for that to happen. But that doesn't seem relevant to the question at hand - whether the $650 billion was "literally lost".
A sell order has to match a buy order. Apparently, on the 27th, a huge number of people wanted to sell 232,316,600 shares when it was 129. There weren't that many buyers at that price, so they got out somewhere between 129 and 97.
Date Open High Low Close* Adj Close* Volume
Oct 28, 2022 99.58 100.85 97.51 99.20 99.20 95,728,200
Oct 27, 2022 97.98 102.50 96.38 97.94 97.94 232,316,600
Oct 26, 2022 131.68 135.55 128.53 129.82 129.82 82,791,500
Oct 25, 2022 130.88 138.35 130.59 137.51 137.51 38,433,200
100 people own 1 share each of a company at $1.00 a share: 100 shares times $1.00 = $100 market cap. Then a new person wants to buy a share from one of the existing owners. The existing owner wants $1.10. Now the stock is worth $1.10 and the value of all 100 shares is $110. The person who sold their 1 share made 10 cents profit, but the remaining $9.90 of new market capitalization was created out of thin air and doesn't exist until those owners are able to sell their shares on the market.
It is possible for actual value to be destroyed or lost to other people.
If you own an oil well and pay out a ton of employees to try a new extraction method which causes a fire - the actual value of your asset has been destroyed. And a lot of money has also been transferred from investors to employees. The embarrassment may also cause you to lose trust of other companies which hurts the value of future contracts. Some of the value you destroyed is gained by other companies since they can now sell their product for more - but the shareholder value of the well you own is lost.
I agree Facebook's value has a speculative element to it - but its pretty clear that the money has been lost because the thing of value has been partially destroyed both by itself and by competitors like Apple and TikTok which is stealing its revenue.
Would you say that if you own 20% shares of the most popular sushi restaurant in town - and then there was a kitchen fire not covered by insurance and you accidentally poisoned a customer - no value of your investment was destroyed?
Of course it was. You can debate how much of it was speculative but even in tech its not all made up.
But that's not what's being reported here. If you owned 20% of shares of the most popular sushi restaurant in town, and absolutely nothing about the restaurant changed, but its market capitalization went down, would you say that no value was destroyed?
It is conventional to describe a loss of value in both cases, but the second kind is much more obviously hypothetical than the first kind.
A lot did change though. Apple changed settings on its tracking which made it harder for Facebook to charge a lot for ads. TikTok became bigger than people were expecting (like a rival sushi restaurant opening next door). And they spent a lot of money on the metaverse that appears so far to be a complete waste.
I agree there is more speculation but overall its cash flow went down a lot and thats not that speculative.
I'm pretty confident that the metaverse will happen. That doesn't mean that we'll all be using "Horizon Worlds" or whatever, but rather that VR and AR will become popular by 2035. The general public is insufficiently imaginative and is over-bearish because of the negative connotations of the Meta brand, but they ignore simultaneous work by Apple and Microsoft, and the fact that the rate of progress by Meta alone has been significant. I don't have any faith in the ability of the general public (not HN readers) to resist the "fun" of the metaverse once the headsets are affordable and comfortable. We should also expect that a person's first foray into it may be through work (rather than games), as things with the form factor of a Quest Pro begin to compete with high-end workstations and are mandated by employers, mirroring the adoption of the PC.
Having tried modern VR devices and experiences, I agree. As a technologist, you can feel that there is "something" there, but it's not quite there yet.
People also generally agree that smoking is bad for your health, that doesn't mean that smoking is actually good... Being a contrarian for the sake of being a contrarian usually doesn't work out, you have to make the right bets.
This is faulty second-order thinking: you shouldn't jump from a bridge just because someone tells you to, but everybody jumping from the bridge should be a strong indicator of what to do.
Funny to see you (even temporarily) modded down. When we were kids, the constant refrain was "if all you friends jumped off a cliff [bridge], would you". Now if you don't jump off too you're usually a "denier" or conspiracy theorist
No, that's still the refrain. You shouldn't do things because your dumb friends do them. The context here is completely different: if you were in a public space and everybody in front of your suddenly turned around and starting running your way, clearly afraid, you probably would too.
I probably would. Splitting hairs though, if I was watching a stock plummet and had no idea what was driving it, I think that would be analogous to your running situation and I'd try and dump it asap. If I saw a stock declining in reaction to news that I didn't think was so bad, I might hold or buy more, and if I was really certain, I might double down even as I was ridiculed for my choice - a la Steven Bury (sp?) in The Big Short
That's perfectly sound reasoning! But it's not the reasoning the OP offered: in their case it was sufficient to be bullish because everyone else is bearish, without regard for any actual interpretation of the news.
Either way: the point is that everybody jumping from the bridge is a very strong predictor of something bad (which you'll want to avoid too). Everybody not jumping from the bridge is just business as usual.
What again, makes me unease just like the OP. It can't be that obvious that the Metaverse is stupid, can it? People believe in much worse things. Why do we have a consensus?
That we remember the people who dissed the iPhone or Dropbox, but not those who correctly panned countless failures. In Sagan's words, "They laughed at Columbus, they laughed at Fulton, they laughed at the Wright Brothers. But they also laughed at Bozo the Clown."
Exactly that, thank you. Myself, I'm far too optimistic, and I held out hope for companies (like Theranos) long after HN has gone super skeptical on them.
Fair points, there are a lot of intelligent minds here. Personally, I'm thinking about the viability of metaverse concepts beyond the walls of Meta, while the bearish concensus I've seen in media and comments seems to focus only on them. Maybe that is an unfortunate side effect of the branding exercise. I appreciate your opinions.
This is a similar reasoning to claiming that college is not useful because people such as Bill Gates, Steve Jobs, or the Zucc did not need it to do well. It's a form of cargo culting.
The problem here is it isn't an entirely unknown market. People have tried to make VR work since the 90s, and everyone has failed. What is the last product Facebook made in house that wasn't bolted onto their existing offerings that has made a dent in anything? They tried to make their own phone OS and failed miserably. They had to buy Instagram and WhatsApp.
There is more than one player in this space, maybe Meta won't succeed, but maybe another will. To your point, I think the biggest challenge is still in the hardware. It has improved since the 90s but is still too bulky and cumbersome, similar to the mobile phone hardware companies tried to make before the iPhone.
I don't have a particularly strong opinion on VR stuff (I don't think I've ever put a VR headset on). I think I'll have a stronger opinion when they become more common, if they become more common. That's the part that's a little hard to see right now, but maybe I just don't get it.
It's notoriously hard to get excited about VR without having tried it. It doesn't seem like it should make that much of a difference, but the "immersive" nature of VR really does make a lot of things a lot more engaging, and with AR there are a lot of real world use cases outside gaming/entertainment/fitness
When I bought 2 different TVs 10 years ago, both were 3d TV, not because I wanted it, but because there was essentially no other choice. All makers were on board. I never used the feature, not even to try it. Call that a bubble if you want. I know what I was on the market for and what the market had to offer.
IMO the real problem is that FB/Meta lacks game development expertise and creating attractive/fun VR universes seems like it's fundamentally a game development problem.
Creating a successful game is not easy, it takes a certain skill set, and the vision that Zuckerberg has demonstrated (virtual offices, museums and meetings) seems completely boring.
I think there might also be a branding problem because a lot of the stuff that people might actually want to do in VR (guns, violence, sex, tentacles, unsavory avatars) can't really happen under the FB/Meta umbrella because they need to remain family and business-friendly, but that stuff obviously has huge revenue potential, so others will beat them to it.
I'm also wondering if VR will continue to remain niche all the way until we have direct brain interfaces where things actually look and feel real.
I think they would honestly be much better off giving up on all the engagement stuff and just going back to their base and serving users what they want. Profits will collapse to 1/5 what they are but they will be highly sustainable profits as opposed to now where it's basically only a matter of time before they reach the tipping point where becoming the next MySpace is inevitable.
It’s a very misleading headline! This is not 650B in liquid cash, but a drop in Meta’s validation (stock price x qty of shares). These are two very different things.
First started buying FB in the IPO in 2012 and have continued buying. Meta/FB is now back at its 2015 price... It's been painful over the past year watching the stock struggle and I don't understand why Zuck is 100% focused on the Metaverse. In it for the long-term but we need Meta to show some more short-term wins while working on future tech.
Lots of people living paycheck to paycheck will be hurt by this. Retirement funds invest heavily in the stock market. Downturns endanger people's pensions.
yes, I know. I, too, have a 401(k) that I will not see any payout from because people somehow find ways to lower the return of my 401(k) every single year, no matter what the stock market does overall.
a random number generator could pick stocks better than whoever runs my 401(k).
There are billions of people who are going to live in cities with minimal space. There is not enough sand in the world to build huge living spaces for everybody. How can VR not become a success?
Quest is only expensive because it comes with all the processing infrastructure. Meta, as well as Apple and others, can split it up and offer a phone that can be connected to a VR headset. With subsidies, VR could be as cheap as $100. Why would somebody buy a big monitor or TV for gaming if they can have 3D for less?
Facebook has to spend now because there is no way to participate in the Metaverse if Apple was able to establish their platform. People shun green messages, they will never meet somebody who doesn't own Apple iGlasses or whatever they will be called.
> There is not enough sand in the world to build huge living spaces for everybody.
This is an absurd statement. There is beyond enough sand, dirt, and land in the world for way more than all of the humans that have ever existed to have plenty of living space. The real (and in this context, irrelevant) question is - should we use it? There is enough.
> Why would somebody buy a big monitor or TV for gaming if they can have 3D for less?
Because the 3D experience as it stands is frankly pretty cumbersome and nauseating. VR is tolerable in short and focused stints. Humans currently need actual reality and the aforementioned living space for health and sanity.
>The real (and in this context, irrelevant) question is - should we use it? There is enough.
You are technical correct but my point still stands. If the answer is no because we don't mine enough rivers and beaches, and we don't relocate enough of humanity, how will there be enough living space that people don't seek a distraction?
Fertility rates have been declining across the developed and developing world for decades [0]. We haven't relied upon VR to maintain a reasonable standard of living thus far — why would such a change be inevitable in the future?
> The UN-Habitat reports that 43% of urban population in developing countries and 78% of those in the least developed countries are slum dwellers. [1]
People can live without VR but will they keep living without it once VR is available? People can also live without mobile phones or cars but whoever can, owns one.
It's cheaper to build a VR headset than to build a house. Whoever is poor will buy a VR headset way before they buy a house.
Facebook is already handing out free internet in poor countries. They can double down and hand out free VR headsets. If they play it right, they will own the platform for remote work. Let children in slums grow up in the Metaverse and they will be native English speakers, but they will work for $1 per day.
People act like Meta is going under because their free cash flow went from $8B to $4B in a year when they've faced headwinds from Apple's new privacy policy and the economy overall.
As far as I can tell the company is in perfectly fine financial health.
The market is essentially betting that Meta is headed in the wrong direction to increase profits over the near term. I think Zuck might actually agree with them.