Pinterest climbs following Elliot stake, FTC Chair Lina Khan pushes Meta lawsuit through and other notable stories from this week.
Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.
Twitter (TWTR) is probing associates of Elon Musk and seeking other information in far-reaching legal requests about his $44B deal to acquire the social media company, Washington Post’s Elizabeth Dwoskin and Faiz Siddiqui reported, citing legal documents obtained by publication. In a subpoena Twitter issued on Monday, its legal team asked for information about a who’s who of Silicon Valley elite, including investors Chamath Palihapitiya, David Sacks, Steve Jurvetson, Marc Andreessen, Jason Calacanis and Keith Rabois, among others. Some of the figures have not been previously named as having any involvement in the deal, suggesting the breadth of Twitter’s search for information to support its legal attempt to force Musk to go through with his deal to buy the company, the authors noted. Twitter’s lawsuit against Tesla (TSLA) CEO Musk is set for a five-day trial beginning Oct. 17 in Delaware. The decision by Delaware Chancery Court Judge Kathaleen St. J. McCormick follows claims by Musk’s lawyers that Twitter sought an Oct. 10 start date “without justification.”
Two proposed class-action lawsuits, which were filed in the Northern District of California in June and July, claim that Meta Platforms (META) and major U.S. hospitals broke medical privacy laws with a tracking tool that sends health information to Facebook, The Verge’s Nicole Wetsman reported. The suits are focused on the Meta Pixel tracking tool, which can be installed on websites to provide analytics on Facebook and Instagram ads.
As previously disclosed by Meta on a current report on Form 8-K filed on June 1, Sheryl Sandberg informed the company on May 28 of her decision to resign from her position as COO of the company following a transition period and to continue to serve as a member of the company’s board of directors thereafter. The company also disclosed at that time that it was expected that the board would appoint Javier Olivan as COO of the company, to be effective upon the conclusion of such transition period. On August 1, the board appointed Olivan as the company’s COO, effective as of such date. Sandberg will continue as an employee of the company through September 30 and after such date, will continue to serve as a member of the board and will receive compensation as a non-employee director pursuant to the company’s director compensation policy.
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Instagram chief Adam Mosseri plans to temporarily relocate to London and build out Instagram’s presence over the coming months at Meta’s King’s Cross offices, The Financial Times’ Madhumita Murgia and Cristina Criddle reported, citing multiple people with knowledge of the plans. A focus for Instagram is scaling up the company’s product team dedicated to retaining its community of influencers, according to the report. Reportedly, Mosseri’s requested to relocate is temporary and in part driven by a want to live in London, said those familiar with the matter.
Sprout Social (SPT) reported second quarter earnings and third quarter guidance slightly above Street consensus. Annual recurring revenue, or ARR, was $256.1M, up 35% compared to the end of the second quarter of 2021. The company said, “We’re delighted to have delivered another strong quarter, again demonstrating the strengths of our team and market opportunity. The world is dynamic, but we are executing well against our strategy, our product innovation is unlocking new ways for customers to realize the power of social, and our partnerships are creating exciting opportunities. I’m proud of our team for continuing to raise the bar.” In a separate release, Sprout Social announced the addition of Instagram Reels to its video management capabilities. Now available to Sprout customers, the integration will support brands in organizing and growing their end-to-end video strategy. Reels quickly became a highly-engaged-with, feature of Instagram’s platform and allows for brands to optimize and repurpose their short-form videos. Sprout Social, which also recently partnered with TikTok to launch a first-of-its-kind integration, now offers functionality to publish and streamline video content across major platforms. Shares were down approximately 3% after both announcements.
Pinterest’s (PINS) shares surged Monday night as the company released its Q3 earnings. Results came in just shy of analyst expectations. The company noted that Q2 global MAUs were down 5% year-over-year to 433M. Pinterest cited a bigger headwind from foreign exchange going forward. “Our current expectation is that Q3 2022 revenue will grow mid-single digits on a year-over-year percentage basis, which takes into account slightly greater foreign exchange headwinds than in Q2 2022,” the company said. “We expect our Q3 2022 non-GAAP operating expenses to grow low double digits percent quarter-over-quarter.” “For the full year, there is no change to our previous expense outlook of non-GAAP operating expense growth in the range of 35-40% year over year,” the company added.
Perhaps, an even bigger catalyst to the over 20% gain in the stock was the disclosure by Elliot Investment Management. Elliott released the following statement on behalf of managing partner Jesse Cohn and senior portfolio manager Marc Steinberg regarding Pinterest: “Pinterest is a highly strategic business with significant potential for growth, and our conviction in the value-creation opportunity at Pinterest today has led us to become the Company’s largest investor. As the market-leading platform at the intersection of social media, search and commerce, Pinterest occupies a unique position in the advertising and shopping ecosystems, and CEO Bill Ready is the right leader to oversee Pinterest’s next phase of growth. We commend Ben Silbermann and the Board on the leadership transition, and we look forward to continuing our collaborative work with Ben, Bill and the Board as they drive toward realizing Pinterest’s full potential.”
Susquehanna analyst Shyam Patil upgraded Pinterest on the belief that its new CEO and activist, combined with an “undemanding valuation,” have skewed the risk/reward to the upside. Pinterest’s Q2 results were “better than feared” and engagement has “finally stopped the bleeding,” said Patil, who thinks activist fund Elliott Management, which has become Pinterest’s largest investor, can help new CEO Bill Ready improve execution.
Baird analyst Colin Sebastian added that the company’s Q2 results and Q3 guidance support the idea that Pinterest occupies a unique position between search and social, facing revenue headwinds not quite as severe as other social media companies. The analyst said he is encouraged by its stabilizing MAUs; suggesting the pandemic unwind may be in the rearview mirror. He said while operating expenses are quite a bit higher than he expected, the new CEO Bill Ready is committed to margin expansion next year, and activist investor involvement likely limits the downside risk in the shares.
Meta platforms posted its first revenue decline, a 1% drop, in the company’s history a week ago in its Q3 earnings report. The company noted Facebook DAUs were 1.97B on average for June, up 3% year-over-year. The company also reported Facebook MAUs of 2.93B as of June 30 were up 1% year-over-year. Meta Platforms said family daily active people, or DAP, was 2.88B on average for June, an increase of 4% year-over-year. Family monthly active people, or MAP, was 3.65B as of June 30, an increase of 4% year-over-year. In the second quarter of 2022, ad impressions delivered across its Family of Apps increased by 15% year-over-year and the average price per ad decreased by 14% year-over-year. In addition, the company’s Q3 guidance came in below analyst consensus, pushing share down nearly 5%. The company said, “We expect third quarter 2022 total revenue to be in the range of $26-28.5 billion. This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty. We also anticipate third quarter Reality Labs revenue to be lower than second quarter revenue. Our guidance assumes foreign currency will be an approximately 6% headwind to year-over-year total revenue growth in the third quarter, based on current exchange rates. In addition, as noted on previous calls, we continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations. We expect 2022 total expenses to be in the range of $85-88 billion, lowered from our prior outlook of $87-92 billion. We have reduced our hiring and overall expense growth plans this year to account for the more challenging operating environment while continuing to direct resources toward our company priorities. We expect 2022 capital expenditures, including principal payments on finance leases, to be in the range of $30-34 billion, narrowed from our prior range of $29-34 billion. Absent any changes to U.S. tax law, we expect our full-year 2022 tax rate to be above the second quarter rate and in the high teens.”
Oppenheimer analyst Jason Helfstein lowered the firm’s price target on Meta Platforms shares following quarterly results. The analyst thinks Meta’s shares are compelling at the current 15-times fiscal 2023 price to earnings, even including FRL losses, and believes the company is better positioned to fend off TikTok with its AI efforts and historical prowess around ad products.
Evercore ISI analyst Mark Mahaney lowered the firm’s price target on Meta Platforms (META) shares. Fundamentally, Q2 trends were mixed, but the Q3 revenue guidance range was 7% below the Street at the high end as the company cited macro-driven advertising softness rising throughout Q2 across all verticals and formats and continuing into Q3, Mahaney said. Meta is “probably a classic Dislocated High Quality stock,” said Mahaney, who believes Meta will work through the macro challenges “as well as any other major ad platform” except Google. Meta’s AI-driven investments, along with its massive reach and frequency, will allow it to continue to improve its value proposition to advertisers, the analyst added.
Twitter is testing a feature that lets users see how many times an account tweets each month, TechCrunch’s Amanda Silberling reported. While reverse engineers identified this feature in development last month, some Twitter users have noticed today that they have gained access to this new feature, the author notes.
Amazon (AMZN) has hired Judd Smith, a senior Republican congressional aide, to join the AWS’ public policy team, in a move to help stymie a new antitrust bill aimed at U.S. technology companies, wrote Bloomberg’s Anna Edgerton and Leah Nylen. The American Innovation and Choice Online Act would prevent Big Tech like Amazon, Google (GOOG, GOOGL), Meta Platforms and Apple (AAPL) from giving advantages to their own products instead of those of rivals. Minnesota senator Amy Klobuchar has spearheaded efforts to get the bill on the Senate floor, but Senate Majority Leader Chuck Schumer noted that the Senate won’t have time to look at it this week before the August recess.
FTC Chair Lina Khan led Democrats in the commission’s majority vote to sue Facebook parent Meta this week, despite FTC staff recommending against bringing a case to challenge the proposed takeover of Within Unlimited, Bloomberg’s Nylen reported, citing three people with knowledge of the decision. The agency voted 3-2 against Meta’s acquisition of the VR fitness app, the author noted.
Meta Platforms has reiterated a threat that it may be compelled to pull Facebook and Instagram from the EU if a new transatlantic data transfer agreement doesn’t materialize, Bloomberg’s Stephanie Bodoni reported. The company could face an imminent data flow prohibition from Ireland’s data protection watchdog in a move that risks impeding transatlantic data flows, the author says. The watchdog could make a determination on a potential ban of EU-U.S. data transfers under standard contractual clauses in the next three months, the author explained.
Meta Platforms’ Instagram said in a blog post that, to better understand different experiences people may have on the platform, it needs to collect and measure demographic information, like race and ethnicity. “Starting today, we’ll ask a random assortment of people on Instagram in the United States to participate in an optional survey where they can share this information,” the company said. “Over the next few months, people on Instagram in the United States may see a prompt asking them for their race or ethnicity. This leads to a survey hosted by YouGov, an international research group that helps companies securely run surveys. Individual, de-identified responses are collected by YouGov, encrypted, and split into parts to be stored across partner research institutions. Instagram will only have access to aggregated information, which means we can’t connect people or their Instagram accounts to their individual responses.”
Meta no longer plans to pay publishers for their content to run on Facebook’s News Tab, sources told Axios’ Sara Fischer. Meta’s VP of media partnerships Campbell Brown told staffers the company was shifting resources away from its news products to support more creative initiatives last week, The Wall Street Journal previously reported. “A lot has changed since we signed deals three years ago to test bringing additional news links to Facebook News in the US. Most people do not come to Facebook for news, and as a business it doesn’t make sense to over invest in areas that don’t align with user preferences,” a Facebook spokesperson told Axios.
Originally Posted August 3, 2022 – #SocialStocks: Five-day trial between Twitter and Elon Musk set for October 17
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