Sluggish growth, unfavorable economic outlook, billions of dollars spent on a metaverse project that leaves people skeptical… Mark Zuckerberg and his company Meta have been at the heart of a stock market storm for several months.
“I appreciate patience and believe that those who are patient will eventually be rewarded.” Mark Zuckerberg’s plea was not heard by investors. Aware this Wednesday that the poor results of his group would be sanctioned on the stock market, the CEO of Meta (ex-Facebook) tried to reassure. The least we can say is that it didn’t work.
This Thursday, Meta had one of the worst sessions in its history. The share price collapsed by almost 25%. The group’s market capitalization is now “only” $263 billion, its lowest level since January 2016. The company is no longer one of the most valued American companies.
On a personal note, Mark Zuckerberg, who owns 13% of the shares of the social network he founded in 2004, saw his assets melt by 11.2 billion dollars in a single day. It now weighs “only” 37.7 billion dollars.
And it doesn’t seem to be about from a simple stock market accident. Since the beginning of the year, the boss of Meta has lost more than 87 billion dollars, or 70% of the value of his assets. From a peak of $141 billion reached in August 2021, Zuckerberg’s fortune has plummeted by more than $103 billion.
Zuckerberg overtaken by TikTok boss
According to Bloomberg Billionaires Index, the creator of Facebook is only the 28th richest person in the world. Like a symbolic passing of the torch, the founder of ByteDance, the parent company of the Chinese social network TikTok, is now well ahead of him. His company is not listed on the stock exchange, but Zhang Yuming has an estimated wealth of 55 billion dollars, 45% greater than that of the American.
Certainly, after the euphoria of the Covid period which had seen technological stocks break records, the awakening is brutal for the tech giants. From Alphabet (ex-Google) to Amazon via Meta, the results have been disappointing for several months and stock market prices are falling.
But for Meta, the situation seems more problematic. Stalled in growth, faced with a contraction in marketing expenditure in this period of inflation and above all in competition with TikTok, Mark Zuckerberg’s group has taken the gamble of revolutionizing the world of the web with its metaverse. Problem: this virtual world is currently a mirage and nothing guarantees its long-term success.
Above all, the group is spending a lot to develop its platform. The company revealed that it had lost more than 9 billion dollars with its Reality Labs division – in charge of the metaverse – since the beginning of the year, including 4 billion in the third quarter alone. And this after having already burned 10 billion dollars in 2021. However, this is only the beginning, the company warned during the presentation of its quarterly results on Wednesday.
“We expect Reality Labs losses in 2023 to increase significantly year over year,” Meta said.
“VR is not aligned with reality”
Next year, the group plans to launch a new virtual reality headset to access its metaverse, on which currently only 200,000 people on average connect each month. A path judged by many analysts as heresy.
“Meta investors’ frustration is that Mark Zuckerberg appears to be wearing a pair of Oculus VR glasses 24/7 and hasn’t realized that his VR is not aligned with the R (Reality, Results and Responsibility to shareholders), analysis in a note Neil Campling, tech analyst at Mirabaud. Captain Zuckerberg continues to steer the Meta ship down an unknown path called the Metaverse and is determined to spend billions and billions of dollars in an effort to reinvent itself.”
In the meantime, the company is buying back billions of dollars of shares (6.55 billion dollars in the last quarter) to reassure investors and show that it believes in its project. Unfortunately shareholders and investors are starting to lose patience.
