Focusing the Metaverse: the Next Generation of Communication and Collaboration. Despite public skepticism at times warranted we have been supporters of the companys strategy to continuously reinvest in a product-led future and its mission to make the world more open and connected. The Meta investor recommends a plan to get the company's "mojo back.". So you know, when I look at what's going on in the business and I try to distill it from the noise, which is what has made us good for 20 years, not following the crowd, not panicking, but really looking at the business. Today, the cost of capital has radically changed, and so has Metas growth rate. Ram Parameswaran is the founder of Octahedron Capital, a global, growth-oriented investment firm that seeks to make concentrated investments in leading public and private companies that drive the world's internet economy. It's a better version of Zoom. And for us, we consolidate behind the things we have deep conviction in with confidence they're going to be worth more in the future. The technology-focused hedge fund with a 0.1% ownership claimed that the company had lost investor confidence as it increased . 2023 Benzinga.com. "Meta Reports Fourth Quarter and Full Year 2022 Results," Page 10. "Jitesh Ubrani: Tweet From March 3, 2023. These include white papers, government data, original reporting, and interviews with industry experts. Our best guess is that maintenance capex for Meta is less than $10B annually. Meta (Facebook) Begins Biggest Layoffs in Company's History, Meta (META) Connect Conference Key Takeaways, Meta (Facebook) Shares Slammed as Earnings, Spending Disappoint. c/o Altimeter Capital Management, LP. They may never get back to the levels at which they traded before. But I do believe that this company like the others that we talked about is going to be worth more in the future supported by real free cash flow. With the gains posted on March 3, Meta Platforms shares are up 54% this year. But far from being a bad decision, we think the recommendations outlined above will lead to a leaner, more productive, and more focused company a company that regains its confidence and momentum. March 8, 2016 PLAN, Access the exclusive Economic Times stories, Editorial and Expert opinion, 90 Days Prime access worth Rs999 unlocked for you, Exclusive Economic Times Stories, Editorials & Expert opinion across 20+ sectors, Stock analysis. He defied expectations and made profits on Priceline, Expedia, Uber, Twilio, and Hubspot. And, while that ultimately is an important long-term measure of success for all of Metas stakeholders, it would be imprudent to make short-term bad decisions just to improve the share price. Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. I think you're gonna see monetization gains against IDFA and either way we lap that issue in Q3 and Q4. My bet is we're gonna have less this year. As a result, the team hastily pivoted the company toward the metaverse including a surprise re-naming of the company to Meta. The deal values the combined company at $35 billion and will. Altimeter Capital Management is a technology focused investment firm based in Menlo Park, CA and Boston, MA. Brad Gerstner, the CEO of Altimeter Capital and a Meta investor, wrote in an open letter to the company in October that Meta needs to "get fit and focused," and he was critical of the hefty. 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Over the last three years, Meta has also dramatically increased its capital expenses. I think if you said why might these numbers have to come down if we're heading into a recession, the numbers are likely to come down. Altimeter Capital Management partner Chris Conforti plans to leave the investment firm, according to people with knowledge of the matter. We didn't see the concerns emerging about hyperinflation about 10 to 12 rate hikes, and we certainly didn't see this tragic more unfolding on the doorstep of Europe. So first, you need to understand why did we see a deceleration of revenue because that informs why we're going to see a reacceleration in the back half of this year. Whatever the reason, that is certainly the perception. Altimeter Feb 2021 - Present2 years 2 months New York, United States Chris is a Partner at Altimeter on the private investing team where he focuses on investing in iconic late stage technology. Copyright 2023 Bennett, Coleman & Co. Ltd. All rights reserved. What's going to be the inflation print in April? https://www.cnbc.com/video/2022/03/14/we-could-go-lower-before-we-go-higher-in-stocks-says-altimeter-capitalas-ceo-brad-gerstner.html. Dont miss out on ET Prime stories! That stuff was being advertised on Instagram. Like many other companies in a zero rate world Meta has drifted into the land of excess too many people, too many ideas, too little urgency. But I think if you have a time horizon over the course of the one to three years, we see a lot of stocks in our universe that we not only think are going to end the year higher, but we think are going to be multiples higher as we look out over the next two to three years. Board of Directors c/o Chairman Henry L. Meyer III United Continental Holdings, Inc. . Finally, Prudential PLC lifted its . We do not take job reductions lightly. We can just go through the list, Uber, Facebook, Roblox. Altimeter Capital Management LP. Do they want to stand with me and ride that out? So the way companies have to get there is by growing their top line and growing their bottom line, the answer as to all companies many most certainly will not. 233 South Wacker Drive Meta. It's our largest position in the book. Open letter: Altimeter Capital founder and CEO Brad Gerstner encourages Meta to cut capex by $5B+, cut headcount by 20%+, and limit metaverse R&D to $5B/year As you know, we are long-term shareholders. So I am very unhappy because I've lost money on the deal. PAR Capital Management, Inc. Do Not Sell My Personal Data/Privacy Policy. Form of Letter Agreement between the Registrant, the Sponsor and each director and executive officer of the Registrant. Some companies require tremendous capex investment to maintain their existing business. ", Medium.com. Everybody knows we've been in this company for a long time. Industry Trends on 4000+ Stocks, Pro Investing by Aditya Birla Sun Life Mutual Fund, Canara Robeco Equity Hybrid Fund Direct-Growth, Cut workforce, spending on metaverse, key investor tells Mark Zuckerberg. PLAN. There isnt a day that goes by where I dont find myself using Metas products to communicate, to connect, and to entertain still amazed at the power of these services. What do you think? Over the last three years, Meta has also dramatically increased its capital expenses. It just launched in 150 countries, has over a billion views. Updated on September 30, 2022. effective risk management for all users of derivative products. Meta needs to regain the confidence of investors, the public and employees, Altimeter Capital Management CEO Brad Gerstner said Monday in an open letterto Zuckerberg. The stock today hit a new low under $3. Altimeter Capital Management, LP Buys Opendoor Technologies Inc, Toast Inc, Duolingo Inc, Sells . . Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. "In short, Meta needs to get fit and focused.". As you know we entered the year with a big bond short, we've now covered that bond short because we don't think that it's possible for the Fed to raise rates 7,10, 12 times as some people think this year. Tina Sharkey, CEO of SherpaFoundry; former board member of HomeAway; and We're down on the year. That could in fact become a tailwind as we get to the back half of the year. They were buying goods, soccer balls on DICK's Sporting Goods and candles on Williams Sonoma. WAPNER: Speaking of going higher up, you see what interest rates are doing today after sitting in a tight spot, they've started to move to 11. . Musk Made a Mess at Twitter. But remember, Facebook's not just sitting there with his hands in the air saying oh my goodness, what can we do in a world where Apple wants to flex its monopolistic muscle and steal all of our advertisers. The silver lining is that unlike many companies, this popular narrative obscures the truth. To put that in perspective, excluding your large metaverse investment, Meta is investing more in capex than Apple, Tesla, Twitter, Snap, and Uber combined! It includes reducing headcount expenses by 20% and limiting the company's pricey investments in "metaverse" technology to no more than $5 billion per year. WAPNER: Okay, that's a that's a big a bold call. 3,30,700 crore) if it cut headcount by at least 20 percent, trimmed capital expenditure by at least $5 billion (roughly Rs. This is a business it's trading at 12 times free cash flow, X the meta investment and 18 times including. We are confident that these employees will find replacement jobs and quickly be back to work on important inventions that will move us all forward. If they just take the incremental cash they're going to generate this year and buy back shares that's 6% of the company Scott, let alone the 50 billion in cash they have sitting on the balance sheet. AGCUU went public at $10 on Oct. 1, and closed Tuesday at $11.80. If Meta was able to control those costs, he said, then it could double its free cash flow and improve its share price. When exactly did you determine that the Board was so inadequate as to need four new directors, all at once, and without an annual meeting or a stockholder vote? I imagine they're going to be super aggressive about how they're buying back shares. August 2012 Protocol ALID: 66703 Altimeter.com is Altimeter's only website. Altimeter is focused on technology investment, and has found multi-billion-dollar success. Neither Altimeter, nor any of its affiliates or personnel, offers investment advisory services via the internet. At the same time that Meta ramped up spend, you lost the confidence of investors. David Einhorn's: Greenlight Capital. 10. What is the metaverse and why are billions of dollars being spent on it? "Time to Get Fit an Open Letter from Altimeter to Mark Zuckerberg (and the Meta Board of Directors).". Despite public skepticism at times warranted we have been supporters Brad Gerstner founded the. PLAN, Yearly Accept. ISDA 2021 SBS Top-Up Protocol, Adhering Organization: Global Business and Financial News, Stock Quotes, and Market Data and Analysis. GERSTNER: Scott, I love that you asked the question. Altimeter Capital launched its two SPACs in October and January, raising a combined $850 million between the two blank-check vehicles. The changes for the Quest 2 begin Sunday, March 5. In fact, we distributed over $6 billion worth of Snowflake to our venture investors last year. The offers that appear in this table are from partnerships from which Investopedia receives compensation. It's a better version of Messenger. It takes effect in 2023. It's my job to ask you about it knowing you're not happy about it and you answered the question. Investopedia does not include all offers available in the marketplace. We certainly our base case, as you know, was a soft landing four to five rate hikes into this year. Menlo Park, CA 94025 (650) 549-9145 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies: . It was being purchased on the Shopify platform and people were using PayPal to check out. As always, happy to connect with you and your team. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. But far from being a bad decision, we think the recommendations outlined above will lead to a leaner, more productive, and more focused company a company that regains its confidence and momentum. Meta said the cost of the Quest 2 will drop $70 to $429.99, while the price of the higher-end Quest Pro will be slashed to $999.99 from $1,499.99. We're withdrawing trillions off the Fed's balance sheet. To experience the full functionality of the ISDA website, it is necessary to enable Javascript in your He also asked Zuckerberg to cut down on capex and employee expenses. If you look at the company, it's now trading at $5 billion enterprise value. We'll see you soon. They're fearful about what's going to happen with rates. Further strengthening our own conclusions, your seemingly desperate actions yesterday appear as a transparent and cynical attempt to maintain your official privileges and power, despite your long historical record of deficient oversight on behalf of stockholders. About Altimeter Capital Will His AI Plans Be Any Different? As I look at it, the market is now pricing in at least seven rate hikes. The Meta investor recommended a plan to get the company's "mojo back," including reducing headcount expenses by 20% and limiting the company's pricey investments in "metaverse" technology VR software and hardware to no more than $5 billion per year. Data is a real-time snapshot *Data is delayed at least 15 minutes. But Meta needs to get its mojo back. Brad Gerstner, Altimeter's chair who encouraged aggressive investment in artificial intelligence, said the firm wanted to engage with Meta and did not have any demands. This will alert our moderators to take action. At $20-$25B of annual capex, Meta will still be investing market leading amounts to help invent the future of AI. $6.9 M. When you look at these questions, it comes down to this. Altimeter Growth Corp. 2 raised $400 million in a January IPO. After the pandemic, hospitals are now on a strong footing. It said Grab is expected to raise between. The metaverse is a shared virtual environment with aspects of online gaming, augmented reality, and more that people can access via the Internet. Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world. I think the only debate is what is the multiple going to be in three months, in six months, in nine months. Based on yesterday's announcement, it seems the Board now agrees that for many years it operated with a suboptimal composition. The last 10 years have been a unique time in tech and for Meta. Look at another one that I know is in your book or at least it was Roblox is down 74% from its 52-week high. When you were with me in December, you said that you had picked some more of that up along with Snowflake. The answer to that is because people are very fearful. We have $130 oil and $6 gas at the pump. Investors in the round: 776 Capital, Altimeter Capital, BoxGroup, Dragoneer Investment Group, FirstMark, General Catalyst, Radcliff Group, ShawSpring Partners, SignalFire, The Baupost Group, Torch Capital, TQ Ventures "In addition, people are confused by what the metaverse even means," Gerstner wrote. To put that in perspective, excluding your large metaverse investment, Meta is investing more in capex than Apple, Tesla, Twitter, Snap, and Uber combined! A Division of NBCUniversal. But you also (sometimes) capitalize the first word of a quote. In the back half, you don't have those same comp issues that you have caused by COVID. To accomplish this goal, we recommend a three step plan that will double FCF to $40 B per year and focus the companys teams and investments: Reduce headcount expense by at least 20%;Reduce annual capex by at least $5 B from $30B to $25B; andLimit investment in metaverse / Reality Labs to no more than $5B per year. Now they've told us that they're going to achieve 15% free cash flow margins this year, five years early, right, while still growing 100%. At Meta, the number of employees is up over 3x from 25k to 85k employees in just the last four years! Its founder faces criminal and civil charges and goes to trial in October. Sincerely, I don't think Mark did a particularly good job of explaining the meta investments. Meta stock is down over 61% in 2022. And then take that part of the world. To put it in perspective, Roblox was a couple percent position for us, right, and Snowflake was a 30% position for us. And so for us, it's about simplification, reduction of gross and making sure that you consolidate that what you own into your highest conviction ideas whether you're playing at home in your 401k or whether you're doing this professionally. Meta and other large companies have made it very difficult for start-ups to hire. In a single quarter, they added 1.4 billion. Right if the Fed raises rates 10 or 12 times given the demand destruction and the slowdown already underway in this country, we will be in a big recession come fall. Brad Gerstner, Founder and CEO of Altimeter Capital; former board member of Orbitz Worldwide; "Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world," Gerstner wrote in the letter. After all, why not hire more people and invest in more things when the cost of capital was near zero and growth seemed unlimited? It can do that by making. It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people. Contact. It makes no sense to me, but that is the risk that you run. Privacy Policy, ISDA uses cookies to enhance your experience on our website. The purpose of this letter is to confirm our adherence as a Protocol Participant to the ISDA 2021 SBS Top-Up Protocol Agreement as published by the International Swaps and Derivatives Association, Inc. on February 25, 2021 (the Protocol Agreement). On top of that we had supply chain challenges. We believe the future lies in AI. +Includes DocuBay and TimesPrime Membership. All quotes delayed a minimum of 15 minutes. 9/29/2022 1:05 AM. These are not numbers on a spreadsheet. Choose your reason below and click on the Report button. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Worse, this skepticism seemed to be affirmed with a nearly-immediate and sizable miss in financial results and continued under-performance throughout 2022. Moreover, Meta has industry leading capabilities in key future technologies like artificial intelligence and immersive 3d that will help drive new products and future growth. And as a result, you know, last year we held up better than most because we own high-quality stocks, and we were short lower quality stocks. To put that in perspective, it merely takes the company back to mid-2021 levels of employee expense and I dont think anybody would argue that Meta wasnt sufficiently staffed in 2021 to tackle a business that looks similar to how it looks today. UPDATE: Altimeter Capital, PAR Capital Issue Letter to United Continental Board - United Airlines Holdings (NASDAQ:UAL) - Benzinga SPY 397.68 0.74% QQQ 293.61 0.83% BTC/USD 22299.46 5.109%. An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. Gordon Bethune, former CEO of Continental Airlines; board member of Honeywell, Prudential Financial, and Sprint; Published Jan 7, 2021 6:11AM EST A ltimeter Growth Corp. 2, the second blank check company formed by Altimeter Capital targeting the tech sector, raised $400 million by offering 40 million. So listen, I'm not happy about it. Whether it is making Whatsapp more seamless or making content and ads more useful on Instagram, Reels and Facebook AI is a globally scarce resource that already is driving noticeable improvements for Metas three billion customers and advertisers. You know, I told people at the time that, you know, there's risk in making these investments, right, we're shareholders of this, we've lost capital. After several years of growing tensions, the potential for a reset under Australia's new Labor government is in question as trade sanctions remain and diplomatic disputes persist. 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