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Meta's stock crashes as metaverse losses mount

Oct 28, 2022
Illustration of a frowning face made from the Meta logo

Illustration: Annelise Capossela/Axios

Meta's st0ck is in free fall as investors grow terrified that Mark Zuckerberg's increasingly costly bet on the metaverse will come up empty.

Why it matters: Zuckerberg is one of the few public company CEOs who can't be fired, given his outsized voting power. That means shareholders either have to ride the roller coaster with him or press the eject button.

Driving the news: Meta's stock closed at $97.94 a share on Thursday, its lowest price since January — of 2016.

  • Reality Labs, the company's metaverse division, has burned a $9.4 billion hole this year, including $3.7 billion in the most recent quarter. During Meta's third-quarter earnings call this week, execs cautioned that those losses will only get "significantly" worse in 2023.
  • Despite that, Zuckerberg is plowing ahead at full speed with spending on the metaverse, basically daring investors to decide whether they're in or out.
  • "I get that a lot of people might disagree with this investment," he said Wednesday. "But from what I can tell, I think that this is going to be a very important thing, and I think it would be a mistake for us to not focus on any of these areas, which I think are going to be fundamentally important to the future."

The big picture: Investors are already wary of Meta's digital ad business' ability to compete with upstart platforms like TikTok and the looming recession.

  • If the company's ad business continues to be challenged, he may be forced to pull back, at least one analyst predicts.
  • "We do not expect Facebook Reality Labs to generate value in the near-to-medium term," Michael Nathanson of MoffettNathanson wrote in a research note Thursday. "If advertising growth comes under pressure, we expect Meta to moderate spending on Facebook Reality Labs to support total company margins and cash flows."

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