It’s been exactly a year to the day since Facebook’s parent company was rebranded as Meta, and during that time the company has entered a financial freefall, analysts say.
Comparing Meta’s market values when it was first announced on October 28, 2021 to today, the company is down an astonishing US$650 billion.
Shares of Meta tumbled 24% on Thursday to $97.94, plunging its stock to near four-year lows. The event cost Meta an estimated US$67 billion, adding to the more than half a trillion dollars in value lost in 2022 alone. Meta’s market capitalization now stands at $263 billion. They are rated lower than Home Depot and have been pushed out of the ranks of the top 20 companies.
Mark Zuckerberg, the CEO of Facebook, saw his own personal fortune plummet by $11 billion after the stock plunge, according to Forbes, which demoted him from the 25th richest person in the world to the 29th richest in the Thursday market close.
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Shares of Facebook owner Meta are in free fall. What is happening?
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Shares of Facebook owner Meta are in free fall. What is happening?
The incident echoes a previous crash in February that erased around $200 billion from Meta’s market value – the largest market value loss ever for a US company.
Ever since changing its name to Meta and investing heavily to create the “metaverse,” a virtual reality world, Facebook’s parent company has been beset with misfortunes. Since the beginning of 2022 until now, the company has lost 70% of its value.
This time last year, the day Facebook rebranded itself as Meta, the company’s market capitalization was just over $900 billion. Just weeks before, it had reached its peak value of over $1 trillion, joining an exclusive club of Apple, Microsoft, Alphabet and Amazon. The business was running high.
Now, a year later, Meta is jumping from crisis to crisis.
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In February, when Meta’s stock fell 23%, Facebook’s daily active user count fell for the first time, sending shockwaves through the tech giant.
Later in July, Meta announced its first-ever drop in revenue, prompted by lower advertising spending as the economy began to slow. Competition for ad revenue has also intensified with Meta’s biggest competitor in the social media space, TikTok.
Another problem: Apple’s recent privacy changes make it harder for companies like Meta to track people for advertising purposes. Forbes reported that Apple’s changes cost Meta about $10 billion in ad revenue.
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All of these factors worked together to slow Meta’s earnings and they also led us to this week when Meta’s stock crashed again.
Similar to the massive one-day loss seen on Feb. 2, Meta’s Thursday stock market crash was triggered by a weak earnings report, predicting a 50% decline in profits, with plans to keep their expenses high for the building the metaverse – at the sum of around $87 billion, which will grow to around $100 billion next year.
There seems to be a conflict between Meta and its investors, who see the Metaverse as a money pit and are calling on the company to cut costs as the economy slows, while Zuckerberg is betting everything on his virtual reality technology.
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Meta’s virtual and augmented reality division, Reality Labs, has already spent $9.4 billion this year (through September 30) to create the Metaverse, but it doesn’t seem like consumers really care.
Meta has set a goal of having 500,000 monthly active users for Horizon Worlds, its virtual reality platform, but a leaked report found the company had reached less than half that number, as reported the Wall Street Journal. The report also found that most Metaverse users did not return to the program after the first month.
“An empty world is a sad world,” one person noted, according to the report.
It seems that if Meta is to become a leader in the next generation of technologies, it will have to work to convince both investors and consumers.
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