Musk alleges additional bases to spurn Twitter, Pinterest probed for discrimination 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.
SNAP INVESTOR UPDATE:
Snap (SNAP) announced a plan to reduce its global headcount by approximately 20% of full time employees. “The headcount reduction is part of a broader strategic reprioritization by the company to focus on our top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow,” Snap said in a regulatory filing. As a result of the strategic reprioritization, Snap currently estimates that it will incur pre-tax charges in the range of $110M to $175M, primarily consisting of severance and related costs, contract termination costs, and other impairment charges, of which $95M to $135M are expected to be future cash expenditures. The majority of these costs are expected to be incurred during Q3. “Potential position eliminations in each country are subject to local law and consultation requirements, which may extend this process into the fourth quarter of 2022 or beyond in certain countries,” it added.
In a regulatory filing, Snap disclosed that Evan Spiegel, CEO and co-founder, outlined a proposal to its board of directors to create the role of chief operating officer “in order to more closely align our engineering, ad product, and sales functions.” Following those discussions, Spiegel made a recommendation to the compensation committee of the board to nominate Jerry Hunter, senior VP of Engineering, to the newly-created role of Chief Operating Officer and the compensation committee approved Hunter’s promotion, effective immediately, on August 30. On August 26, Jeremi Gorman, the company’s Chief Business Officer, notified Snap that she will leave the company to pursue a new opportunity, the filing also stated. Gorman’s last day at Snap will be September 16. “Gorman has agreed to continue to serve as Chief Business Officer for an interim period to assist with an effective transition of her duties and responsibilities. Accordingly, on August 30, 2022, we entered into a transition agreement with Ms. Gorman. Ms. Gorman has confirmed that this transition is not related to any disagreement with us on any matter relating to our accounting, strategy, management, operations, policies, or practices (financial or otherwise),” the filing stated. Snap also disclosed preliminary year-over-year revenue growth for the third quarter of 2022 through August 29 of approximately 8%.
In an investor presentation update, Snap says “forward looking revenue visibility remains limited given uncertainty in the macro environment.” The company expects a $500M reduction in its annualized cash cost structure relative to Q2, with a $50M estimated reduction in fixed content costs within cost of revenue and $450M estimated reduction in adjusted operating expenses. Snap is “focused on delivering adjusted EBITDA and positive free cash flow at current revenue levels.” It says its reduced fixed content costs expected to be fully implemented by end of 2022 and that “disciplined management” of adjusted operating costs will drive “meaningful operating leverage when revenue growth accelerates.”
Stifel analyst Mark Kelley reiterated a Hold on Snap after the company posted an Investor Update which updated quarter-to-date Q3 revenue trends, as well as plans to reduce global headcount by about 20% and change its management team. Kelley believes there are some positives and negatives to weigh from the update, with a notable positive being “meaningfully better” QTD revenue trends. The analyst added, however, that the biggest negative is the departure of Jeremi Gorman. Kelley said that, taken together, he believes remaining on the sidelines is the right move as the company navigates a challenging macro environment.
Citi analyst Ronald Josey downgraded Snap. The analyst expected Snap to take cost-cutting actions following its Q2 results but is surprised to see its chief business officer, Jeremi Gorman, and its head of North America ad sales, Peter Naylor, leave to join Netflix (NFLX), as press reports suggest. The moves could prolong Snap’s ad growth challenges and increase execution risk as the company builds improved measurement tools and monetization ramps at Spotlight, Camera, Shopping, and Maps, Josey told investors in a research note. He downgraded the shares to account for continued monetization headwinds and execution risk.
Meta Platform’s (META) Instagram announced that it is testing two new ways to help users shape their Instagram experience. “We’re testing the ability to mark multiple posts in Explore as Not Interested,” the company said. “We’ll immediately hide those posts and refrain from showing you similar content in the future. We’ll also soon start testing the ability to tell Instagram you don’t want to see suggested posts with certain words, phrases or emojis in the caption or hashtags. Whether you’re seeing something that’s not relevant, or have moved on from something you used to like, you can use this feature to stop seeing content that’s not interesting to you.”
In a tweet, Twitter (TWTR) Safety said, “Today we’re rolling out Twitter Circle! This lets you choose on a Tweet-by-Tweet basis who can see your Tweets–everyone or only those in your circle.” Additionally, Twitter said that, starting August 25, it is integrating podcasts into Twitter as a part of its newly redesigned Spaces Tab. “We know that some discussions need more than 280 characters, and bringing people closer to the ideas, content, and creators they know and love is core to Twitter no matter where the conversations take place,” the company said. Starting Thursday, the reimagined Spaces Tab, including the addition of podcasts, will be visible to a group of global English-speaking audience on iOS and Android.
The Snap Team blogged, in part, “Snap’s Camera is one of the most used cameras in the world. Today, we’re introducing Dual Camera, a new way for Snapchatters to capture multiple perspectives at the same time – so everyone can be part of the moment, as it happens. Open your Snapchat and you’ll see a new icon in the camera toolbar. With one simple tap, you can start creating Snaps and Stories, or more polished Spotlight videos, with double the perspective. Dual Camera is a creative way for our community to capture exciting moments while being part of the memory – like rocking out at a music festival, or everyday moments like your culinary adventures in the kitchen Dual Camera has four layouts including vertical, horizontal, picture in picture, and cutout. Snapchatters can also add beloved Snapchat creative tools, including music, Stickers and Lenses. Dual Camera will be available globally on iOS today, with Android support in the coming months.”
TWITTER VS. MUSK LATEST:
Proxy advisory firms Glass Lewis and ISS have both recommended Twitter shareholders vote for the deal with Tesla (TSLA) CEO Elon Musk, according to Bloomberg. However, Musk is going to seek additional discovery and a delay to the trial over his buyout of Twitter, CNBC’s David Faber reported, citing sources.
Musk disclosed that on August 29, his advisors sent a letter to Twitter (TWTR) formally notifying Twitter that he is terminating their merger agreement “for additional bases separate and distinct from those bases set forth” in the July 8 letter to Twitter terminating their merger agreement on that date. “Because the facts described in the August 29 Termination Letter were known to Twitter and withheld from the Reporting Person, and because Twitter has taken the position that the Merger Agreement remains in effect, the Reporting Person sent the August 29 Termination Letter on the basis of the facts described therein,” Musk wrote this morning in a regulatory filing. In the letter to Twitter, Musk wrote, “Allegations regarding certain facts, known to Twitter prior to and as of July 8, 2022, but undisclosed to the Musk Parties prior to and at that time, have since come to light that provide additional and distinct bases to terminate the Merger Agreement. Although the Musk Parties believe this termination notice is not legally necessary to terminate the Merger Agreement because they have already validly terminated it pursuant to the July 8 Termination Notice, the Musk Parties are delivering this additional termination notice in the event that the July 8 Termination Notice is determined to be invalid for any reason.” The letter references the August 23 report from the Washington Post regarding the Twitter whistleblower. The Zatko complaint “alleges far-reaching misconduct at Twitter-all of which was disclosed to Twitter’s directors and senior executives, including Parag Agrawal-that is likely to have severe consequences for Twitter’s business,” wrote Musk to Twitter. As previously disclosed, on July 8, Twitter received a notice of purported termination of the agreement and plan of merger, dated as of April 25, by and among X Holdings I, X Holdings II, a wholly owned subsidiary, and, solely for the purpose of certain provisions of the merger agreement, Elon R. Musk. The merger agreement provides that, subject to the terms and conditions set forth in the agreement, the acquisition sub will merge with and into Twitter, with Twitter surviving the merger and becoming a wholly owned subsidiary of parent, which is wholly owned by Mr. Musk. On August 29, Twitter received another notice of purported termination of the merger agreement, the company disclose in a regulatory filing. In a response to that second notice of termination, lawyers for Twitter stated in part: “As was the case with your July 8, 2022 purported notice of termination, the purported termination set forth in your August 29, 2022 letter is invalid and wrongful under the Agreement… It is based solely on statements made by a third party that, as Twitter has previously stated, are riddled with inconsistencies and inaccuracies and lack important context. Contrary to the assertions in your letter, Twitter has breached none of its representations or obligations under the Agreement, and Twitter has not suffered and is not likely to suffer a Company Material Adverse Effect. Twitter intends to enforce the Agreement and close the transaction on the price and terms agreed upon with the Musk Parties.”
Musk has subpoenaed a Twitter whistleblower, targeting documents and communications on spam and alleged security flaws at the social media giant as part of his ongoing attempt to legally terminate his agreement to acquire the company for $44B, Reuters’ Tom Hals reported, citing a court filing.
A judge ruled that Twitter must give some additional bot information to Elon Musk, as some added data “seems warranted,” but the judge in the case between the company and Tesla’s (TSLA) CEO called Musk’s full data request “absurdly broad,” according to Bloomberg.
Meta Platforms CEO Mark Zuckerberg posted earlier: “Excited to launch our partnership with JioMart in India. This is our first-ever end-to-end shopping experience on WhatsApp — people can now buy groceries from JioMart right in a chat. Business messaging is an area with real momentum and chat-based experiences like this will be the go-to way people and businesses communicate in the years to come.” On its blog the company added: The launch is part of a strategic partnership between Meta and Jio Platforms to accelerate India’s digital transformation and provide people and businesses of all sizes opportunities to connect in new ways, fueling economic growth in the country. The JioMart on WhatsApp experience will revolutionize the way millions of businesses across India connect with their consumers while bringing unparalleled simplicity and convenience to people’s shopping experience. People in India can start shopping on JioMart via WhatsApp by simply sending ‘Hi’ to the JioMart number on WhatsApp.”
CAMBRIDE ANALYTICA SETTLEMENT:
Facebook parent Meta Platforms agreed to settle a lawsuit that accused the social-media platform of allowing third parties, including Cambridge Analytica, to access private user data, The Wall Street Journal’s Jennifer Hiller reported, citing a court filing. Meta and the Facebook users suing the company said in the joint filing that they had reached an agreement in principle but didn’t provide financial or other details. The two sides requested a 60-day stay of the lawsuit, which followed revelations that Cambridge Analytica, a now-defunct British consulting firm that worked on former President Donald Trump’s 2016 campaign, had improperly obtained and exploited Facebook user data, the author notes.
Vivek Sharma, head of virtual reality platform Horizon at Meta Platforms, told Reuters that he is departing the Facebook parent. A spokesman for the company confirmed his exist and said that his team would report directly to Vishal Shah, VP of Metaverse.
Meta CEO Mark Zuckerberg said on Joe Rogan’s podcast that the company’s next virtual reality headset will launch in October, The Verge’s Adi Robertson reported. Zuckerberg indicated that the headset, which is codenamed “Project Cambria,” will likely be release around the company’s annual Connect event, Robertson notes.
Sandeep Pandey, Twitter’s VP of Engineering, is leaving the company after more than a decade to join Meta, Insider’s Kali Hays reported. A Twitter spokesperson confirmed Pandey is leaving the company and said it remains focused on managing the company effectively.
Netflix (NFLX) has appointed two Snapchat ad executives, Jeremi Gorman and Peter Naylor, to spearhead the development of its global advertising strategy and develop teams to run it, wrote Parker Herren for Ad Age.
Argus analyst Joseph Bonner downgraded Zoom Video (ZM). The analyst cites the company’s 7% decline in Q2 operating income and a cut to its FY23 guidance, also noting that the stock has been battered by the recent Tech sector and market selloffs. While Zoom Video continues to add enterprise customers, the number of those additions is declining, which is not a promising sign even allowing for some post-pandemic deceleration, Bonner told investors in a research note.
After Snap announced plans to reduce headcount by 20% and reorganize the team as revenue growth remains well below management’s initial expectations, JPMorgan analyst Doug Anmuth acknowledged that Q3-to-date revenue growth of 8% was better than expected, but also noted Q3 is a back-end-weighted quarter with back-to-school and said he believes the “environment likely remains fluid.” Snap additionally said Chief Business Officer Jeremi Gorman and VP of Americas Peter Naylor will be leaving and he believes both were instrumental in building out Snap’s advertising and video efforts and their departures will make it more difficult to stabilize the sales organization, added Anmuth. The analyst, who said the layoffs, reorganization and other news does not change his thesis that the business is facing significant challenges, reiterates an Underweight rating on Snap shares.
IF I COULD TURN BACK TIME:
Twitter admitted “mistakes” over the past week after adding misinformation labels to COVID-19 tweets from doctors and scientists as well as suspending accounts, The Washington Post’s Taylor Lorenz reported. The company removed the labels and restored the accounts after queries about 10 specific tweets and accounts, Lorenz said, with a Twitter spokesperson commenting “We acknowledge the mistakes made in these cases, and we are reviewing our team’s protocol to safeguard against such mistakes in the future. We appreciate the community’s feedback and remain focused on reducing harm and providing informative context across Twitter.”
Twitter founder and former CEO Jack Dorsey tweeted Thursday that he regrets the social media platform became a company. “The biggest issue and my biggest regret is that it became a company,” Dorsey tweeted in response to a question about whether Twitter turned out the way he had envisioned. When asked about what structure he wished Twitter would operate under, Dorsey said that it should be “a protocol” and that Twitter should not be owned by a state or another company.
California’s Civil Rights Department is probing Pinterest (PINS) and has contacted former employee and whistleblower Ifeoma Ozoma as a potential witness, Protocol’s Issie Lapowsky reported, citing an email to Ozoma. The investigation comes two years after Ozoma and former Pinterest coworker Aerica Shimizu Banks alleged discrimination and retaliation at the company. “At Pinterest, we believe in fostering an open workplace culture where employees feel safe and empowered to raise any concerns about their work experience,” LeMia Jenkins Thompson, CCO at Pinterest, wrote in a statement to Protocol. “The California Civil Rights Department is conducting investigations of a number of companies, and Pinterest is one of them. Our discussions with the CCRD are ongoing and we remain committed to reviewing and evolving our people practices to best support our employees.”
Originally Posted August 31, 2022 – #SocialStocks: Snap’s investor update includes headcount reduction and Q3 trends
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