Zuckerberg’s Corporate Control of Meta Allows Him to Pursue Metaverse Project

Shares of Meta Platforms (META) have plummeted 71% so far this year to a 6-year low.  Meta Platforms last Wednesday reported another disappointing quarterly earnings report that sent the stock reeling and knocked it from the ranks of the largest 20 U.S. companies.  After giving a weaker-than-expected revenue outlook, CEO Zuckerberg asked investors for patience with his company’s investments in the unproven metaverse at an already-challenging time for digital-advertising companies. 

Meta Platforms is spending billions of dollars on developing the metaverse, an immersive virtual world that CEO Zuckerberg has long believed represents the future of computing.  The strategy is undercutting earnings as Zuckerberg acknowledges the metaverse is unlikely to deliver significant revenue for years.  Since the corporate structure of Meta Platforms gives Zuckerberg control of the company, investors have little recourse to affect his strategy except to keep selling the stock.

CEO Zuckerberg owns or controls about 90% of Meta Platform’s unlisted B shares, which have ten votes each versus one vote each for the Class A shares that are publicly traded.  This structure prevents activists from influencing the board and management, something that has happened with big tech stocks in the past.

Matrix Asset Advisors said, “Zuckerberg is tone deaf to what the company owners want, outside of himself. Meta Platforms could double in price in a year with better management, with management that is more focused on shareholders.”  According to ISS Corporate Solutions, 33 companies in the S&P 500 have unequal voting rights similar to those at Meta Platforms, including Alphabet (GOOGL), Comcast (CMCSA), and Paramount Global (PARA).

Homestead Advisors said that Zuckerberg deserves the benefit of the doubt on the course he is taking Meta Platforms.  “He took Facebook public when it had huge margins, so he clearly cares about making money.  He waited years to monetize WhatsApp, so he’s clearly patient, and he bought Instagram early, so he’s clearly smart.  Zuckerberg has earned the right to pursue this long-term strategy.”   

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