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Comment by bionhoward | Hacker News Reader

this is misleading, market cap isn't the same thing as net profit. if anything, the massive loss in market cap makes meta a way better investment now than it was before it "lost $650B" because the p/e ratio went down below historical averages (it's 9.46 now, historical average p/e ratio is like 13-15 iirc)

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The existing investors - that own the company - are probably not consoled by the fact that their once valuable stock is now a good buying opportunity

Investing in Meta is saying you believe Mark Z has some kind of edge or grand vision to keep their platforms relevant that he hasn't shown the world yet. What do you think that is? What do you know that the market doesn't?

The market doesn’t know shit. XR is the obvious future, and just because investors don’t understand that doesn’t mean it’s not gonna happen.

I think a cataclysmic climate catastrophe is a more obvious future than everyone jacked into a VR setup

Everyone jacked into their VT headsets, living from their couches, not leaving the house in a fossil fueled vehicle or recreating in a fossil fueled boat is maybe what our planet desperately needs

Market lacks the understanding of most of the new tech. It's been like that for decades. Apple stock is a great example, some of them tried to bankrupt Tesla with shorting and uber (as a bad) and many other new tech IPOs. I think it's all because of many old fund managers with double digit B. or more funds, lack of understanding many details about todays web tech.

Uber has basically given up on self driving, is losing money, now has more competitors and is still charging less than its suppliers real costs in most markets. It's really not clear we won't be having the conversation going on about meta today about uber in 5 years. Maybe worse, since meta at least makes a profit

XR is the future, sure, but it's missing the killer app that convinces people to shell out for it. We're talking a lot about market value here, if people don't want it then it isn't creating any value for them. Maybe we should focus on actually creating some value before we try to leapfrog too many levels of technology?

Creating that value is precisely what Meta is investing in.

I don't see actual business problems being solved, I see tech showcases looking for customers.

XR has been the future since sci fi movies in the 80s. It doesn’t mean it’s the near future (price, USP, funding model, any consumer desire to adopt).

The people who held all the stock have lost a combined 650B since that date. It may be a better investment now - but 650B was literally lost by these folks.

Not really. There was no 650B in cash. If they all tried to exit at the top they wouldn’t all have been able to do it.

How do you know that?

Picture 10 elephants trying to get through a 4-foot doorway, all at once.

If the volume of sell orders gets too high, the exchange shuts down trading in that stock.

If it's high but not "too high" then the price they all get will be significantly less than what they expected.

> If it's high but not "too high" then the price they all get will be significantly less than what they expected.

My question is: how do you know that?

A sell order has to match a buy order. Apparently, on the 27th, a huge number of people wanted to sell 232,316,600 shares when it was 129. There weren't that many buyers at that price, so they got out somewhere between 129 and 97.

Date Open High Low Close* Adj Close* Volume

Oct 28, 2022 99.58 100.85 97.51 99.20 99.20 95,728,200

Oct 27, 2022 97.98 102.50 96.38 97.94 97.94 232,316,600

Oct 26, 2022 131.68 135.55 128.53 129.82 129.82 82,791,500

Oct 25, 2022 130.88 138.35 130.59 137.51 137.51 38,433,200

There has to be another party on the other side of every trade. If someone wants to sell Meta stock for $300, there needs to be someone who wants to buy it for $300.

Exchanges have a collection of their participant's bids ("I will buy for this price") and offers ("I will sell for this price"). When a bid is matched with an offer, the transaction goes through.

Now this is the important part - there are only so many people willing to buy for $300. If there is a mass sell off, all those offers are consumed, and the exchange starts filling the offers of people who would buy for $299.99 (or whatever the next lowest price is). Once those offers are consumed, further down the price ladder we go.

That alone will ensure that not all sellers are getting top dollar, however a market selloff like that would trigger a cascade of lower prices (buyers withdrawing their bids and relisting at a lower price, or not relisting at all), along with things like stop losses and algorithms getting triggered.

What if there are well-funded buyers who think the stock is priced fairly?

That's a different scenario. The previous comment said:

> If they all tried to exit at the top

Assuming that "they all" means "the vast majority of shareholders", then sell pressure would be higher than buy pressure by definition, and the price would drop.

If there was enough buy pressure to absorb the sell pressure, then we're in a scenario where half or less of the shareholders are trying to exit.

There would not be enough buyers. If there were you would have an absurd situation where there is 650bn chasing the shares at that price based on the same public information that is making the “Other half” want to sell everything at that price. That might be possible with more “rigged” markets like cryptocurrency shitcoins. But I can’t see it is possible here.

I agree that the shareholders would never actually all sell in unison without there being some motivating force for that to happen. But that doesn't seem relevant to the question at hand - whether the $650 billion was "literally lost".

Where did it go?

It is possible for actual value to be destroyed or lost to other people.

If you own an oil well and pay out a ton of employees to try a new extraction method which causes a fire - the actual value of your asset has been destroyed. And a lot of money has also been transferred from investors to employees. The embarrassment may also cause you to lose trust of other companies which hurts the value of future contracts. Some of the value you destroyed is gained by other companies since they can now sell their product for more - but the shareholder value of the well you own is lost.

I agree Facebook's value has a speculative element to it - but its pretty clear that the money has been lost because the thing of value has been partially destroyed both by itself and by competitors like Apple and TikTok which is stealing its revenue.

It never existed.

Cash value is realized upon liquidation. Before that, it’s just paper.

Would you say that if you own 20% shares of the most popular sushi restaurant in town - and then there was a kitchen fire not covered by insurance and you accidentally poisoned a customer - no value of your investment was destroyed?

Of course it was. You can debate how much of it was speculative but even in tech its not all made up.

But that's not what's being reported here. If you owned 20% of shares of the most popular sushi restaurant in town, and absolutely nothing about the restaurant changed, but its market capitalization went down, would you say that no value was destroyed?

It is conventional to describe a loss of value in both cases, but the second kind is much more obviously hypothetical than the first kind.

A lot did change though. Apple changed settings on its tracking which made it harder for Facebook to charge a lot for ads. TikTok became bigger than people were expecting (like a rival sushi restaurant opening next door). And they spent a lot of money on the metaverse that appears so far to be a complete waste.

I agree there is more speculation but overall its cash flow went down a lot and thats not that speculative.

And as a result of their stock plummeting, a lot more can change like loss of morale, and the top employees leaving (beyond those they are cutting)

you can equally say - where did it come from?

It went back to where it came from: nowhere. Market cap is a completely made up concept in the first place.

100 people own 1 share each of a company at $1.00 a share: 100 shares times $1.00 = $100 market cap. Then a new person wants to buy a share from one of the existing owners. The existing owner wants $1.10. Now the stock is worth $1.10 and the value of all 100 shares is $110. The person who sold their 1 share made 10 cents profit, but the remaining $9.90 of new market capitalization was created out of thin air and doesn't exist until those owners are able to sell their shares on the market.

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