There Has to Be a Better Way to Lose $800B
wsj.com
wsj.com
1) Employee pay being partially in stock grants 2) Loans and funding being driven by stock grants
The first is hard, because most of your employees just got a pay cut when inflation is already hitting hard. If your stock price drops this fast, a lot of employees are going to look around because you stopped paying them as much.
Likewise, managers are going to be cranky about being paid less, cranky managers make for bad decisions, company culture starts suffering quickly.
The second point sounds silly, when you think about how much cash inflow is happening. The trick is the balance of debt to assets in a company, and how badly that balance sheet changes when internally held stocks no longer have _close_ to the same value they did before.
This translates on their 2021 10-K [0], which was published February this year because accounting. Their cash reserves and marketable securities both dropped, the latter by over $10B. That's not good when we're suddenly heading into a buyer's market for asset accumulation.
They _could_ go for a buyback right now, but their cash on hand needs to _stay_ on hand, because their stock-derived liquidity is now worth vastly less. Particularly if they kept up with that giant rise in COGS (Cost of Goods Sold) -- they need to keep hitting R&D to make their new strategy successful.
As of last year, Meta was rapidly amping up their COGS but revenue was matching, but those have stopped growing at the same rate. This is going to be a very messy correction.
Buuuut I hate Meta, hate their complete lack of ethics, and want to watch them burn, so I'm going to keep reading their financial reports like a freaking nerd and giggling.
[0]: https://www.sec.gov/Archives/edgar/data/1326801/000132680122...
Meta is using all the huge FCF generated in the 2010s to propel the company to next leap.
There should be mechanisms at the Govt. level to force CEOs to bet the company at least once per decade.
I applaud Zuck, somebody has to push the envelope forward, and Meta is trying to unlock the future of work and home entertainment for 25B/yr with their Reality Labs.
In a world where every CEO looks at governments mandated climate/COVID paranoia to leech off contracts and subsidies or outright transforms public companies into cults/political organizations , somebody has to think about how to elevate the quality of life of people, in a pragmatic and practical manner with new widgets, new platforms and new ways to work.
I don't know if Reality Labs will ever be a success but the goal seems to be producing a leap as big as Windows 95.
We could use some of that amongst this era where everything is about politics .
Many companies are able to pull off big bets without "betting the company". Apple does it all the time and usually succeeds. Google does it all the time and usually fails. The one time Google did "bet the company" (Google+) it was a disaster that made all their existing users' experiences worse.
You have to be willing to risk what you have in order to achieve the next leap and an even bigger vision. It's true for everybody ranging from individuals to countries.