META Earnings Breakdown + How Insiders Trade
The tea on why Mark stopped selling stock for 2 years
Niya Dragova
November 10, 2023
Ahoy Metamates! 🚢 🏴☠️
I was waiting to write the earnings issue - secretly hoping that Mark would trade shares - and he did. FYI: He hasn’t sold a single share in 2 years (and the drama behind why is next level) so this is a pretty substantial development.
This comes at the heels of increased sales from other executives, and some pretty solid developments in Meta’s investment narrative. Outside of Reality Labs, which continues to be a dumpster fire for the time being - although I personally remain very bullish.
In this week’s subscriber only issue:
The tea on why Mark stopped trading for nearly 2 years ( spoiler: nothing to do with the stock price)
How much stock each Meta executive is selling and at when
Key themes from the Earnings Call
Who does Meta owe $18B to and why?
Analyst stock price predictions from Goldman, Morgan Stanley etc
Foreign exchange rates are helping Meta’s stock
Why we’ll be hearing a lot more on Whats App
AI’s role in Meta’s revised metaverse strategy
The History Of Meta’s Executive Insider Stock Sales
Its not too long ago that Mark’s trading was so exemplary that the Wall Street Journal wrote an entire expose on it. And then, unexpectedly, he stopped trading for nearly two years. What happened?
Source: SEC Form 4
Reputation damaging lawsuits happened:
Mark stopped trading in Nov 2021
Around the same time, there was a lawsuit against Meta alleging insider trading related to Cambridge Analytica
It was ultimately dismissed - right at the same time as Mark’s trades halted.
What very few people know is that there was a second lawsuit in 2021, this time targeting executives and board members directly.
The first lawsuit focused a lot of attention on Mark and Sheryl’s sales in particular but went after the company as a whole.
Source: Court Documents from Case No. 5:18-cv-01725-EJD
… and for awhile almost all major executives at Meta, except the GC stopped using 10b5-1 plans, despite the lawsuit being dismissed.
Sales likely stopped bc the second lawsuit was - should I say- a bit more serious. Serious enough for almost the whole exec team to stop trading? Evidently so.
For starters, the Plaintiff wasn’t some random individual but the state of Rhode Island and the defendants were Facebook’s executives and board as individuals, as well as the company itself. (ultimately a nothingburger, but scared everyone shitless).
It happens to have an entire section of accusations against individual executives and board members:
Source: Original
… and it’s incredibly salacious - some cliff notes in the thread below ( spoiler alert, Meta won this case on a brilliant technicality: basically told the court all the evidence needed for discovery is super extra private and the court somehow said ok).
!!! news. mother of all lawsuits quietly filed last month vs Facebook in Delaware. I'll explain why it avoided notice until now in a bit but Zuckerberg, Sandberg, CFO, board inc Peter Thiel and Palantir are defendants - it's a result of sealed docs between FB execs and board. /1
— Jason Kint (@jason_kint)
Sep 21, 2021
Mark’s trades this week indicate that he’s back to his regular 10b5-1 trading schedule, selling the same amount of stock each time with a limit price. He’s also using a collective seller plan to gift shares to CZ.
Source: Form 4 filings
How each exec at Meta is using their 10b5-1 plan in 2023:
felt cute, might delete later
Mark: collective seller plan, 28,009 shares sold with a price limit trigger of over $300
Jennifer Newstead ( CLO)- plan started again on February 3. Selling 670 shares each time, appears to have no trigger
Susan Li ( CFO)- plan started again on May 13, Single sale of 30,413 shares. Likely a single trade plan
Nicholas Clegg- plan started again May 1, has nearly doubled the amount of shares sold since last year. Looks to have a $300 limit
Boz- Sells quarterly.
Javier Olivian - appears to sell at market price
Earnings Call Key Themes
We’re seeing projections over $400 again.
We’ve come a long way since last quarter - and AI showing early monetization boosts is helping stock analysts turn a blind eye to Reality Labs bleeding cash uncontrollably with no end in sight. For not at least, Mark has been given a wide birth to spend on the metaverse.
Top line #s to actually care about:
Reality Labs: $210M revenue, in the negative by $3.4B
Quest 2 Sales down by 26% QoQ
Reels drove 40% more Instagram engagement since launch
It has become expense net neutral, focus on driving revenue in ‘24
AI: 30 million Llama downloads last month
7% increase in time spent on Facebook via AI feed recommendations
Advantage+ Shopping @ $10B run rate
Business Messaging at 600M conversations daily cross platform
60% of all WhatsApp users in India message a business weekly
Threads: 100M MAU
Hiring for next year will focus on:
AI, infrastructure, Reality Labs, and monetization
Continuing to bring more legal in house
Headcount is currently down 24% YoY
Unexpected bonus:
Foreign currency tailwind of 2% anticipated in Q4
Analyst Price Targets & Concerns
We’re back in bull territory 😀
as of Nov 9, 2023
Goldman Sachs : $384.00
Focusing more on performance outside the US
Wants to see ROI on data center architecture investments
Morgan Stanley:$375.00
Cautious about open source model strategy
Negative on continuing losses in Reality Labs
JP Morgan : $420.00
Stayed quiet on call, reiterating bull rating
Whats App & Business Messaging Are Coming Forward
While they don’t get reported separately, one of the key undertones of Meta’s press cycle has been the hype around business messaging. My thesis on why here:
and in case you missed the puff piece by NYT this week, also worth a read:
AI - both a tailwind and a headwind
Stock Analysts don’t know quite what to make of AI in general, let alone of Meta’s strategy in particular. That comes with some tricky implications - and the veneer is starting to crack.
Good:
AI is driving increased engagement and monetization
Mark continues to allude it will also drive ops efficiency through health tooling
Bad:
Analysts are struggling with increased infra costs
That’s compounding with Reality Labs losses
For right now, Brian Nowak at Morgan Stanley is the only one leading a charge against increased data center costs - and he’s also not convinced open source isa good thing. And while Brian is a boomer - he is THE boomer whose skepticism tanked the stock last summer. I think increasing costs in Reality Labs will drive him over the edge early next year unless Meta has a rabbit to pull out of the hat that I’m not aware of.
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