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.
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.
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.
Maybe you mean "individual investors." Institutions account for the majority of trade volume, and have for a long time.
The presumption was always "high tech companies have so many opportunities to reinvest their profits, they shouldn't pay any dividends."
If that's really true, then they shouldn't. However, if they can't use the money effectively, then the dividend is the responsible option. Even a one-time payout, like https://www.nytimes.com/2004/07/21/business/technology-micro....
It does seem clear that MZ can't be trusted with all that cash.
I'd love to see a source for this. What is the precise nature of this obligation, and who enforces it?
In other words, it was a statement of opinion. You can't really [citation needed] opinions like that.
Management is generally given huge leeway here and shareholders will usually vote with their feet as has happened with Meta.
Even if you sue, you probably wouldn't win, and it would be horrendously expensive.
https://markets.businessinsider.com/news/stocks/meta-faceboo...
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?
Several people corrected the word "obligation" to "expectation." That's the right word.
If you get a big dividend check from Meta for your shares (and by "big" I mean "Bobby Axelrod big") you invest it in your leading opportunity.
Zuckerbergs owns less than 50% of the company but he can do whatever he wants and no activist investor has any say.
Owning these Class-A shares (why not call them class Z?) is worth 1/10 as much as owning class B shares that Mark and his cronies own.
The multiple voting share structure is an abomination and perversion of stock market.
The old way was at least more honest.
Regular shares -> most risk, most profit, actual voting rights
Preferred shares -> less risk, some profit, no voting (what Class A should be)
Bonds -> least risk, set yield, highest preference at liquidation
Investors can choose to avoid these shares, of course, since they're missing the "possible takeover premium." In the old days, they would have.
I don't see Elizabeth Warren or Bernie Sanders crusading against this, by the way.
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.
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."
But I mostly agree with your comments here.
This depends on interest rates, inflation, relative attractiveness of the industry (concentration, ease of entry, etc).
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.
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.
[1] https://home.treasury.gov/resource-center/data-chart-center/...