As you’re surely aware by now, the most widely-followed earnings report after the close on Wednesday was Meta Platforms (NASDAQ:META), and the stock was destroyed after hours.
I first gained awareness of “The Facebook” years before most people, since their first real office was literally one block from my own in Palo Alto. Many times I would see Zuck walking around the streets, talking to employees one-on-one or, occasionally, jogging. I even remember their chalkboard sign propped up on the sidewalk encouraging applicants to come in to get a job at TheFacebook.com. Little did any of us know that it would (briefly) be a trillion dollar company. Here are some thoughts I have on the matter………..
Seven Years: Gone
The stock has already had a wretched year but they were torched by another 20% after hours yesterday (and what idiot jumped in immediately after the close and paid $142 for this thing, hoping to get in cheaply?)
Looking at the daily chart, you can see that a full seven years of price progress has been obliterated. I think we can safely say that Facebook (sorry, I refuse to use their idiotic new name) is never, ever, ever going to revisit its high price again. Ever. So, seven years gone. Seven years of the biggest bull market in history, with trillions of dollars of federal money supporting equities, all for nothing.
Of course, back in autumn 2015 when Facebook was the same price level it is right this very moment, the stock was a dynamo, delighting shareholders with its amazing performance.
The momentum has shifted just a bit. You can see here how the stock, which had reached almost $400 only last year, is now threatening to break into the double digits. Yes, META has lost about 75% of its value. Seventy-five freakin’ percent! Can you imagine how UN-motivated the employees at the company must be now, since stock compensation is such an important component? How many Facebook employees bought houses a year ago they can no longer afford? How many of them are saying, in one form or another, “Screw this place.” The best people there are going to leave. No one wants to hang around a sinking ship.
Cramer Called It
Of course, if any of us had any sense at all, we would have grabbed a golden profit opportunity simply by paying attention to what Mr. Jim Cramer tweeted on Monday.
The kiss-of-death for which Cramer is so famous worked yet again (which makes sense, consider its 100% success rate).
I would also point out, since we’re on the subject of Cramer, how completely childish, idiotic, and ridiculous the Metaverse “interview” was between Zuck and Cramer, as shown below. So what problem, exactly, does this solve? How is rendering two human beings (more or less, just go with me on this one) as badly-drawn cartoon characters offer any value above and beyond just a plain old camera pointing at two people talking? Why in the HELL does Zuck think people are going to use any of this crap, let alone pay for it, when it is simply a gee-whiz novelty and accomplishes absolutely zilch?
Buyback Blowup
Now for my favorite part.
Until 1982, corporations were not permitted to buy their own stock in the open market. It wasn’t forbidden as a courtesy or because it was unseemly (which it is). No, it was literally forbidden, as in illegal. But in 1982, the laws were changed to permit the grandest form of self-dealing imaginable, which is corporations purchasing their own stock, and countless trillions of dollars in buybacks have taken place ever since.
This is done, of course, in the name of “shareholder value“, but the simple truth is that senior executives deploy company cash to juice up the value of their own stock options so they can liquidate at higher prices. Simple as that. It’s just an elegant form of theft.
How delightful it is, then, to see Facebook pulling this crap and having it blow up it in their faces. The table below shows the tens of billions of dollars of META shares the company has bought over just the past fifteen months.
Nearly $50 billion in cash was thrown into the open market to gobble up shares at a price north of $300. With the stock trading at ONE THIRD that level, this means the company has completely torched about $32 billion in value. Nice going, fellas.
As An Advertiser
I own my company. It’s as small as can be – just me – and I’m pretty much a perfect advertiser for Facebook. And I have indeed placed ads there, targeting what I feel is the appropriate demographic.
Here’s the problem, though: Facebook is truly interactive. I found that out in a big hurry. Because when people see ads for my service, they get pissed off at seeing “spam” in their news feed, so they slam it. They say snarky things about it. They downvote it. And everyone else piles on. So not only are my ads slathered with negative replies, but I get tons of ugly comments in my own feed with people pissed off that they’re seeing ads at all.
If an ad for my services appears on, let’s say, Google, if a person doesn’t like it, they just ignore it. But with Facebook, I get the full-on hate treatment, and frankly, I could live without it. So I made the decision a while ago to never advertise their again, because it’s not worth the crap I have to endure from the other direction. Now, of course, my revenue doesn’t amount to a hill of beans, but there are probably tens of thousands of other former advertisers who feel the same way and have decided to take their ad dollars elsewhere.
What’s The Mission?
Want to know what Facebook’s business model is? They’re happy to tell you. Just take a look at this word salad:
And, of course, they can’t keep trying to shove the “Meta” rename down our throats. Come on, guys. Nobody calls Google “Alphabet (NASDAQ:GOOGL)“, and nobody calls Facebook “Meta“. We know you were trying to broaden your horizons and not seem confined to a website which hasn’t fundamentally changed in fifteen years, but still……………
I think Facebook’s present condition, as well as its future, is best expressed by this illustration of the Evolution of the Trash Icon:
