Welcome to "#SocialStocks," The Fly’s weekly recap of Wall Street’s reactions to social media stock news.
LAYOFFS: The Federal Trade Commission, FTC, has demanded Twitter (TWTR) to reveal internal communications related to Elon Musk as well as information about the company’s layoffs, Ryan Tracy of The Wall Street Journal reported. The FTC is concerned that staff reductions could compromise Twitter’s ability to protects its users, the Journal reports, citing documents it reviewed. In 12 letters sent to the company since Musk took over on October 27, the FTC has also requested the company to "identify all journalists" granted access to company records and to provide info on the revamped Twitter Blue subscription services, the documents show, according to the Journal. The FTC is seeking to depose Musk in relation with the probe.
Despite, the FTC probe, Musk believes that Twitter has the potential to become cash flow positive in the near term. The company has "a shot" at being cash-flow positive next quarter, Musk told a Morgan Stanley investor conference. Musk, who is also the CEO of Tesla (TSLA), said it was "startling" how poorly Twitter managed to make money off its messaging service and that Twitter has been hit by a "massive decline in advertising," some of which he said was due to the cyclical nature of ad spending and some of which was "political," according to Reuters’ Sheila Dang and Krystal Hu.
Meta Platform’s (META) is planning to cut thousands of jobs as soon as this week after eliminating 13% of its staff, or 11,000 jobs, in November 2022, Bloomberg’s Sarah Frier, Edward Ludlow and Kurt Wagner reported. According to people familiar with the matter, the imminent round of cuts is being driven by financial targets and is separate from the "flattening" of its organization. Those working on the plan are hoping to have the plan ready before CEO Mark Zuckerberg goes on parental leave for his third child, one person says.
THREATENING TIK TOK: U.S. Senators Mark R. Warner D-VA , chairman of the Senate Select Committee on Intelligence, and John Thune R-SD , ranking member of the Commerce Committee’s Subcommittee on Communications, Media and Broadband, led a group of 12 bipartisan senators to introduce the Restricting the Emergence of Security Threats that Risk Information and Communications Technology or RESTRICT Act, legislation that will comprehensively address the ongoing threat posed by technology from foreign adversaries by better empowering the Department of Commerce to review, prevent, and mitigate information communications and technology transactions that pose undue risk to our national security. "Today, the threat that everyone is talking about is TikTok, and how it could enable surveillance by the Chinese Communist Party, or facilitate the spread of malign influence campaigns in the U.S. Before TikTok, however, it was Huawei and ZTE, which threatened our nation’s telecommunications networks. And before that, it was Russia’s Kaspersky Lab, which threatened the security of government and corporate devices," said Senator Warner. "We need a comprehensive, risk-based approach that proactively tackles sources of potentially dangerous technology before they gain a foothold in America, so we aren’t playing Whac-A-Mole and scrambling to catch up once they’re already ubiquitous." "Congress needs to stop taking a piecemeal approach when it comes to technology from adversarial nations that pose national security risks," said Senator Thune. "Our country needs a process in place to address these risks, which is why I’m pleased to work with Senator Warner to establish a holistic, methodical approach to address the threats posed by technology platforms – like TikTok – from foreign adversaries. This bipartisan legislation would take a necessary step to ensure consumers’ information and our communications technology infrastructure is secure." The RESTRICT Act establishes a risk-based process, tailored to the rapidly changing technology and threat environment, by directing the Department of Commerce to identify and mitigate foreign threats to information and communications technology products and services.
OUTSIDE INVESTMENT: Ari Emanuel’s Endeavor (EDR) invested in Twitter in mid-January, Sara Fischer of Axios reported, citing two sources. The investment wasn’t material to Endeavor, but made sense strategically, one source told the website. Endeavor is the first outside investor known to have bought into Twitter 2.0, according to Fischer.
DAUS: Tom Alison, head of Facebook at Meta, said in a post to the company’s newsroom: "Facebook is off to a great start this year. Contrary to reports otherwise, Facebook is not dead nor dying, but in fact alive and thriving with 2 billion daily active users. People are using Facebook for more than connecting with friends and family, but also to discover and engage around what is most important to them… At Meta, we pride ourselves in putting people at the center of new technology trends. Our investments in AI are unlocking new ways for people to discover great new content on Facebook and share it with the people they care about. As our world class Meta AI research teams continue to make advancements in AI, particularly generative AI, Facebook – and Meta more broadly – will look to bring this transformative technology to billions of people and allow them to create and share in new ways. Stay tuned."
TWITTLE: Certain Twitter users were unable to access the service and others had issues with photos and links on Monday, in one of the more serious service disruptions since new owner Elon Musk took over the helm, wrote Clare Duffy for CNN. "Some parts of Twitter may not be working as expected right now"…"We made an internal change that had some unintended consequences," said the company in a tweet, according to the CNN story. "This platform is so brittle (sigh). Will be fixed shortly," said the Tesla (TSLA) chief Musk in a separate tweet
SNAPCHAT VS. TIKTOK: Snapchat (SNAP) is removing dozens of children in the U.K. from its platform every month compared with tens of thousands blocked by rival TikTok, Reuters’ Martin Coulter reported, citing internal data the companies shared with Britain’s Ofcom. Ahead of the country’s planned Online Safety Bill, Ofcom asked TikTok and Snapchat to disclose how many suspected users under the age of 13 they had booted from their platforms in a year, the authors said. According to the data, TikTok noted that between April 2021 and April 2022, it had blocked roughly 180,000 suspected underage accounts in Britain each month, whereas Snapchat said it removed roughly 60 accounts per month, the author wrote.
PRICE CUT: Meta Platforms CEO Mark Zuckerberg said the Quest Pro headset will cost about $999 and the Quest 2 headset with 256GB memory will cost about $429 in price slash for both products.
TERMINATED: In an 8K regulatory filing, Zoom Video (ZM) terminated the employment of Greg Tomb as the company’s president, effective March 3. Tomb will receive the severance benefits payable in accordance with his previously disclosed employment arrangements that are payable upon a "termination without cause." Shares were down slightly after the filing.
FOR THE CHILDREN"S SAKE: Senators Edward J. Markey and Richard Blumenthal sent a letter to Meta CEO Mark Zuckerberg calling on the company to halt its reported plan to open Horizon Worlds, its landmark virtual reality environment platform in the metaverse, to teens aged 13 to 17. In their letter, the Senators highlighted Meta’s repeated failures to protect young teens from harmful interactions, advertising, and content on Facebook and Instagram, as well as Meta’s own internal research, which finds gaps in the company’s understanding of user safety in social virtual reality experiences. "Meta’s plan to target young people with offerings in the metaverse is particularly concerning in light of your consistent failures to protect young users," Senators Markey and Blumenthal wrote in their letter to Zuckerberg. "With a documented track record of failure to protect children and teens, Meta has lost parents’, pediatricians’, policymakers’, and the public’s trust." "As our constituents grow increasingly concerned about the effects of online platforms and social media apps on teens’ well-being, your plans to imminently pull these young people into an under-researched, potentially dangerous virtual realm with consequences for their physical and mental health is unacceptable," they continued. "Any strategy to invite young users into a digital space rife with potential harms should not be driven by a goal to maximize profit. We call on you to immediately halt Meta’s plan to bring teen users onto Horizon Worlds." In February 2022, Senator Markey wrote to the Federal Trade Commission urging the agency to use its authority to ensure that children are protected from threats to their privacy, safety, and wellbeing in the metaverse.
ANALYST COMMENTARY: Arete Research analyst Richard Kramer downgraded Meta Platforms to Sell from Neutral.
Stifel analyst J. Parker Lane lowered the firm’s price target on Zoom Video to $75 from $85 and reiterated a Hold rating on the shares after the company disclosed that President Greg Tomb has been terminated from his role effective March 3 without cause. Considering Tomb only joined the company in early June 2022 the news is "surprising," said Stifel, which believes it will take some time to gain visibility on the succession plan and potential changes to the go-to-market under a new sales leader.
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