. PLAN. At the start of COVID on March 26th when I felt about like I do today, growth stocks were under assault. "Jitesh Ubrani: Tweet From March 3, 2023. I'll acknowledge that Roblox and other names like that are in a much smaller, are in a much more perilous position in this market because they're not generating as much free cash as some of these other companies that I already mentioned. Altimeter Capital Management, LP Buys Opendoor Technologies Inc, Toast Inc, Duolingo Inc, Sells . The deal values the combined company at $35 billion and will. He argued that this was "one of the big reasons behind these price cuts.". Perhaps it was the re-naming of the company to Meta that caused the world to conclude that you were spending 100% of your time on Reality Labs instead of AI or the core business. Amazon Is Closing Its Cashierless Stores in NYC, San Francisco and Seattle, Amazon Pauses Construction on Second Headquarters in Virginia as It Cuts Jobs, Stock Traders Are Ignoring Blaring Bond Alarms, iPhone Maker Plans $700 Million India Plant in Shift From China, Russia Is Getting Around Sanctions to Secure Supply of Key Chips for War. And Meta certainly has abundant financial resources to invest and / or return to shareholders. ", Jitesh Ubrani of market research firm IDCpointed outthat Meta's year-over-year VR shipments plunged 93% in the fourth quarter, while those of Pico from rival ByteDance rose 110%. The facts are startling. And as a result, you know, last year we held up better than most because we own high-quality stocks, and we were short lower quality stocks. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. In our view given United's valuable and industry-leading strategic asset base this long-term underperformance directly results from an underqualified, ineffective, complacent, and entrenched Board. Meta and other large companies have made it very difficult for start-ups to hire. Can it possibly be worth a trillion? Is it done? Data is a real-time snapshot *Data is delayed at least 15 minutes. WAPNER: Okay, that's a that's a big a bold call. Get this delivered to your inbox, and more info about our products and services. With all of that said, we believe the company can responsibly and reasonably reign in capex while continuing to invest aggressively in AI and other critical areas. effective risk management for all users of derivative products. And I've let the company know that, right? It can do that by making. An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. I have spent over 20 years investing behind some of the worlds great founders who are helping to invent the technologies that move the world forward. I think if you said why might these numbers have to come down if we're heading into a recession, the numbers are likely to come down. Brad Gerstner's Altimeter Capital Management has between $300 million and $400 million in assets under management, and invests almost exclusively in the services sector. Data is a real-time snapshot *Data is delayed at least 15 minutes. Facebook's revenues in Q1 were lower than people expected. We simply wanted to further engage and continue sharing our thoughts as an interested shareholder. The lagging stock price under this Board's control and supervision directly reflects substantial underperformance in terms of operational reliability, customer satisfaction, market share, profitability, and return on invested capital. You probably know you should capitalize proper nouns and the first word of every sentence. Meta reported in February that Reality Labs lost $13.72 billion in 2022. But remember, Facebook's not just sitting there with his hands in the air saying oh my goodness, what can we do in a world where Apple wants to flex its monopolistic muscle and steal all of our advertisers. Unlock your 30 days free access to ETPrime now. Got a confidential news tip? 233 South Wacker Drive So take Snowflake as an example. In fact, our internet stock index is at a 10-year low and software is back nearly where we were in 2016 before the rerating of software occurred. Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world. Altimeter Capital Management, LP If you look at, if you look at, you know, what we expect to occur over the rest of the year, this stock will compound as it continues to beat earnings, as it continues to expand its use cases, even without multiples expanding, right, as investors begin to look at those higher numbers in '23 and '24. Sign up for free newsletters and get more CNBC delivered to your inbox. That's what makes markets. He left GC and became co-CEO of NLG, an early online travel start-up purchased in part by IAC.He co-founded Openlist.com, a local search start up that was self-funded and sold to Marchex (Nasdaq: MCHX);He was a partner at PAR Capital, a multi-billion hedge. The offers that appear in this table are from partnerships from which Investopedia receives compensation. for a description of how we use cookies. By any normal company or start up standard, $5 B per year would seem like an extraordinary amount. I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion. As such, we think Meta company should cap its metaverse investments to no more than $5B per year with more discrete targets and measures of success, as opposed to todays much more ambitious and open-ended strategy. . Today, the cost of capital has radically changed, and so has Metas growth rate. Activist investor Brad Gerstner, founder and CEO of tech-focusedhedge fundAltimeter Capital, sent anopen letterto CEOMark Zuckerbergin October calling for a pullback in metaverse spending. 3,30,700 crore) if it cut headcount by at least 20 percent, trimmed capital expenditure by at least $5 billion (roughly Rs. The definitions and provisions contained in the Protocol Agreement are incorporated into this Adherence Letter, which will supplement and form part of each Protocol Covered Agreement between us and each other Adhering Party. Brad Gerstner's Phone Number and Email Last Update. We simply wanted to further engage and continue sharing our thoughts as an interested shareholder. I don't think they can. At $20-$25B of annual capex, Meta will still be investing market leading amounts to help invent the future of AI. Over the last three years, Meta has also dramatically increased its capital expenses. ET on GuruFocus.com Builders Union LLP Buys AppLovin Corp, Match. Sign up for free newsletters and get more CNBC delivered to your inbox. "New Prices for Meta Quest 2s 256GB SKU + Meta Quest Pro. What is the rate of increase? Subject: Meaningful Board Change Required So I think they got to match the investment to the revenue growth of the business. He said the money the company is currently spending to develop VR could add up for a decade before it comes to fruition. So you know, when I look at what's going on in the business and I try to distill it from the noise, which is what has made us good for 20 years, not following the crowd, not panicking, but really looking at the business. Whatever the reason, that is certainly the perception. ISDA fosters safe and efficient derivatives markets to facilitate effective risk management for all users of derivative products. In Q1 of 2021, everybody was sitting on their couch. To put that in perspective, excluding your large metaverse investment, Meta is investing more in capex than Apple, Tesla, Twitter, Snap, and Uber combined! Background [ edit] In 2008, Brad Gerstner founded Altimeter Capital in Boston, Massachusetts. Days Trial PLAN, Access the exclusive Economic Times stories, Editorial and Expert opinion, 90 Days Prime access worth Rs999 unlocked for you, Exclusive Economic Times Stories, Editorials & Expert opinion across 20+ sectors, Stock analysis. The social media company had in June cut plans to hire engineers by at least 30%, with Zuckerberg warning employees to brace for an economic downturn. We understand that the Protocol is designed to amend only those Protocol Covered Agreements between two Adhering Parties that were previously amended pursuant to the terms of the August 2012 Protocol, the March 2013 Protocol or both. This is expected to facilitate trade as the West ratchets up sanctions on Russia. FTX's list of investors spans powerful and well-known investment firms: NEA, IVP, Iconiq Capital, Third Point Ventures, Tiger Global, Altimeter Capital Management, Lux Capital, Mayfield,. Capital October 20, 2022 Risk & Capital. Right. The letter is the latest sign that Meta investors are starting to express reservations about the company's recent performance. See here for a complete list of exchanges and delays. Its founder faces criminal and civil charges and goes to trial in October. The stock is 51% off of its high. click here! In an open letter to CEO Mark Zuckerberg on Monday, shareholder Altimeter Capital Management urged Meta Platforms Inc., the parent company of Facebook, to streamline by eliminating positions and capital expenditures. GERSTNER: Well, first let's talk about what took Facebook down, right? It said Grab is expected to raise between. ", Medium.com. 2550 Sand Hill Road, Suite 150. I hear you but look, there are, there are some people who think and it's not maybe it's not a Snowflake, but it's a you know, a basket of these kinds of names that may never get back. In the back half, you've already lapped IDFA, in the back half of this year, the supply chain issues begin to ameliorate. Dont miss out on ET Prime stories! Moreover, I am a strong supporter of founder-led companies especially when they have your successful track record of seeing the future. I expected that as the world of normalized post Omicron that we would get back to the five-year average multiple. As such, we would encourage the company to move aggressively and cut at least 20% of employee-related expenses by January 1, 2023. But I do believe that this company like the others that we talked about is going to be worth more in the future supported by real free cash flow. The reductions for the Quest Pro start March 5 in the U.S. and Canada, and on March 15 in other countries where it is supported. We want to hear from you. . So if you want to bet on the future of growth, Southeast Asia is one of the places you want to bet this is one of the dominant brands, dominant internet platforms, and it's got 7 billion of cash on the balance sheet. The facts are startling. Warren Buffett's: Berkshire Hathaway. Despite public skepticism at times warranted we have been supporters of the companys strategy to continuously reinvest in a product-led future and its mission to make the world more open and connected. Trading Book: Climate Risk Scenario Analysis Close Cart 0; Reveal page search bar; ISDA fosters safe and efficient derivatives markets to facilitate effective risk management for all users of derivative products. 2499 1749, Monthly These times are what try people if you dig a hole and get into the hole here at the bottom after having lost, you know, my sense is you're locking in losses that you're going to come to regret. And then take that part of the world. WAPNER: I know I know you're not happy about it. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes. Can it possibly be worth 100 billion? GERSTNER: Scott, I love that you asked the question. This would double annual FCF and put FCF as a percentage of revenue more in line with Google, Microsoft, and Apple. Why 20%? The technology-focused hedge fund with a 0.1% ownership claimed that the company had lost investor confidence as it increased . So the way companies have to get there is by growing their top line and growing their bottom line, the answer as to all companies many most certainly will not. Where's your exposure today? This is a leading internet company in Southeast Asia. I have deep respect and admiration for founders that continue to grind, inspire, and invent long after the financial motivation is gone. c/o Altimeter Capital Management, LP. Before we we move, what do I do with Facebook? And so, for our LPs, the bet is simple. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Nobody debates whether or not this company is going to be more valuable in the future. The changes for the Quest 2 begin Sunday, March 5. What is the Fed going to do? I have spent over 20 years investing behind some of the worlds great founders who are helping to invent the technologies that move the world forward. As between each other Adhering Party and us, the amendments in the Appendices to the Protocol shall apply to each Protocol Covered Agreement to which we are a party in accordance with the terms of the Protocol and this Adherence Letter. Finally, Prudential PLC lifted its . SCOTT WAPNER: Now let's move to an exclusive interview with a marquee investor who saw the destruction in tech coming, Altimeter Capital's founder and CEO Brad Gerstner. In short, Meta needs to get fit and focused. These are not numbers on a spreadsheet. "Meta Reports Fourth Quarter and Full Year 2022 Results," Page 10. I mean, two years ago we were we were having this conversation. From Grand Teton to Universal Speech Translator to Make-A-Video, we are witnessing a Cambrian moment in AI, and Meta is no doubt well positioned to help invent and monetize that future. To read full story, subscribe to ET Prime, Billed annually at Tina Sharkey, CEO of SherpaFoundry; former board member of HomeAway; and In the last 18 months, Meta stock is down 55% (compared to an average of 19% for its big-tech peers). That's why even the sell side consensus numbers have their growth rate accelerating, almost doubling between Q2 and Q4 of this year and we think it will accelerate even faster. How many dogs want to eat the dog food? They are people with families and kids to support. Right? Right? As a result, the team hastily pivoted the company toward the metaverse including a surprise re-naming of the company to Meta. However, there are few signs that VR or some of the company's metaverse apps, such as Horizon Worlds, are catching on with the public beyond early adopters. 2023 Benzinga.com. There isnt a day that goes by where I dont find myself using Metas products to communicate, to connect, and to entertain still amazed at the power of these services. We were about 30% to 40% depending upon which basket you looked at software internet above the five-year average. Their last reported 13F filing for Q4 2022 included $3,652,571,000 in managed 13F securities and a top 10 holdings concentration of 99.95%. Comprender el funcionamiento social, poltico, econmico, cultural y natural de la sociedad a fin de reflexionar, hacer propuestas y asumir compromiso en torno a las polticas de desarrollo nacional, local y regional en el mbito del respeto de los derechos humanos, la integracin econmica y la convivencia social, bajo una concepcin de desarrollo humano sostenible. It makes no sense to me, but that is the risk that you run. Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. Board of Directors c/o Chairman Henry L. Meyer III United Continental Holdings, Inc. . We think both of those are solvable. In the letter, Gerstner said Altimeter Capital doesn't have demands and simply wants to engage with Meta management. In fact, we distributed over $6 billion worth of Snowflake to our venture investors last year. "If the company were investing $1-2B per year into this project, then that confusion might not even be a problem.". [2] The firm focuses on technology investments in both public and private markets globally. 16,839 Followers. The Digital Markets Act (DMA) is a groundbreaking European law designed to rein in the power of the gatekeepers of the digital economy. A Division of NBCUniversal. It can do great this, the business can be incredible. In the back half, you don't have those same comp issues that you have caused by COVID. In a single quarter, they added 1.4 billion. GERSTNER: Well, the first thing I would say is this, set aside SPAC. Brenda Yester Baty, Head of Strategic Initiatives at Lennar Corp.; former SVP Revenue Management at Carnival Cruise Lines. This is a business it's trading at 12 times free cash flow, X the meta investment and 18 times including. Worse, this skepticism seemed to be affirmed with a nearly-immediate and sizable miss in financial results and continued under-performance throughout 2022. I'm going to own these companies, there are a handful of select companies that are free cashflow positive that are going to be worth more in the future. Oct 24 (Reuters) - Facebook-parent Meta Platforms Inc (META.O) needs to streamline by cutting jobs and capital expenditure, its shareholder Altimeter Capital Management said on Monday in an open letter to Chief Executive Mark Zuckerberg. So we've taken up our exposure, we've consolidated behind our five or six best ideas, we don't run leverage and so the bet for our LPs, I'm the largest LP in the fund. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. There are a lot of companies with speculative business models, right, that are should have never been valued where they were valued and if you don't have absolute conviction, right, they can grow their product, grow their top line and grow their earnings to match where those earlier prices were, then you need to rotate those dollars out of those companies and into companies where you have that level of conviction. All quotes delayed a minimum of 15 minutes. Meta stock is down over 61% in 2022. I mean you have defended it at every turn from the issues that the company has had you you defended Mark Zuckerberg, you've defended Sheryl Sandberg and you you did it quite loudly on this program. It's good to see you again. Altimeter Capital owns about 2.46 million Meta shares. How big is that market? It massively distorted multiples on the way in and it's massively distorting multiples on the way out. As you know, Altimeter Capital Management and PAR Capital Management are long-term United Continental Holdings, Inc. ("United") stockholders that together own approximately 7.1% of United's outstanding common stock. The firm also considers investments in the consumer products and services, gaming, retail, and transportation sectors. Meta needs to regain the confidence of investors, the public and employees, Altimeter Capital Management CEO Brad Gerstner said Monday in an open letterto Zuckerberg. We hereby appoint ISDA as our agent for the limited purposes of the Protocol Agreement and accordingly we waive, and hereby release ISDA from, any rights, claims, actions or causes of action whatsoever (whether in contract, tort or otherwise) arising out of or in any way relating to this Adherence Letter or our adherence to the Protocol Agreement or any actions contemplated as being required by ISDA. In the last 18 months, Meta stock is down 55% (compared to an average of 19% for its big-tech peers). If you have a two-to-three-year time horizon, there is no doubt there are a lot of stocks that are going to be up well over 100% off this bottom. While the increased AI investment was clearly well timed, Metas investment in the metaverse, while smaller than the AI investment, has gotten the most attention and has led to much confusion. You do, you do great work, excited for the new show and let's stay after it. What Does Metaverse Mean and How Does This Virtual World Work? We have $130 oil and $6 gas at the pump. They just announced that they're going to be profit, full company profitable by 2023. I don't think stocks today reflect a great price discovery about where these stocks are going to be in six months, let alone two years, but I'm also eyes wide open to the fact that we could go lower before we go higher. Digital Markets Act (DMA): How the EU Law Will Work, Mark Zuckerberg: Founder and CEO of Meta (formerly Facebook), Crowdfunding: What It Is, How It Works, Popular Websites, FTX: An Overview of the Exchange and Its Collapse, New Prices for Meta Quest 2s 256GB SKU + Meta Quest Pro, Time to Get Fit an Open Letter from Altimeter to Mark Zuckerberg (and the Meta Board of Directors), Meta Reports Fourth Quarter and Full Year 2022 Results. And so we add on a fair amount of exposures we entered this year. GERSTNER: So, Scott that you know the top six names in our book are all companies that we believe are, you know, both accelerating, expanding margins, expanding free cash flow margins, right, and that are critically important and will be worth more in the future. But listen, there's massive uncertainty in the world. In fact, we believe that augmented and artificial intelligence has the potential to drive more economic productivity than the internet itself. The Wall Street Journal reported on Thursday that Grab was in talks with Altimeter. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes. You can learn more about the standards we follow in producing accurate, unbiased content in our. Can it possibly be worth 200 billion? We're withdrawing trillions off the Fed's balance sheet. Steven Cohen's: Point72 Asset Management. Why 20%? Altimeter Capital owns a stake of about $320 million, according to the Wall Street Journal, but that only equates with a 0.1% share of the company, according to Meta's latest filings with the. August 2012 Protocol ALID: 66703 About Altimeter Capital Altimeter is a global investment firm managing both public and private funds focused on the airline, travel, technology, internet, software, and consumer sectors. Over time, we intend to share with United's stockholders our detailed analysis, which has led us to conclude, among other things, that: So I am very unhappy because I've lost money on the deal. The vast majority of the capex has been an essential and high-returning investment in data centers, Nvidia GPUs and other AI resources to solidify the companys position as one of worlds leaders in AI. Altimeter said annual free cash flow can be doubled to $40 billion if it cut headcount by at least 20%, trimmed capital expenditure by at least $5 billion to $25 billion a year and capped. We've never seen on the order of magnitude of the Marshall Plan at the beginning of COVID. With Snowflake, the question as to whether or not that business is going to compound, I think is not one that many people will debate. Rates are going up and we have a war. United Continental Holdings, Inc. Share Your Design Ideas, New JerseysMurphy Defends $10 Billion Rainy Day Fund as States Economy Slows, This Week in Crypto: Ukraine War, Marathon Digital, FTX. Conforti plans to join a new firm as a co-founder with former Whale Rock Capital Management partner Kristov Paulus, said one of the people, who asked not to be identified because the information is private. The letter is the latest sign that Meta investors are starting to express reservations about the company's recent performance. You would simply do R&D quietly and investors would focus on the core business and the breakthroughs in AI. Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world. But far from being a bad decision, we think the recommendations outlined above will lead to a leaner, more productive, and more focused company a company that regains its confidence and momentum. It can compound its earnings and this that and the other but I need to know can it get back to that level. Experience Your Economic Times Newspaper, The Digital Way! Now they've told us that they're going to achieve 15% free cash flow margins this year, five years early, right, while still growing 100%. Superficial change in panicked response to rigorous scrutiny is hardly noble or a basis for stockholders to have confidence in your judgment. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. In short, Meta needs to get fit and focused. We can just go through the list, Uber, Facebook, Roblox. For reprint rights: Continue reading with one of these options: Login to get access to some exclusive stories, Get access to exclusive stories, expert opinions &, Valid only with UPI, Credit & Debit Cards Autopay, Inciting hatred against a certain community, 15 I mean, we're talking about billions of dollars in revenue but you left that out. These are not numbers on a spreadsheet. So no, these issues are rea,l what's going on in Russia is real, what's going on in Europe is real. Altimeter was founded in 2008 and is headquartered out of Boston, Massachusetts. It will get there three years from now because it's free cash flow margin will continue to expand and if you just get it, give it the multiples that are currently in the market, right, that have already drawn down on free cash flow, you get to that 3X that I quoted. All of China internet down over 80%. Brad, thank you. Sign Up. Benzinga does not provide investment advice. We also reference original research from other reputable publishers where appropriate. We are confident that these employees will find replacement jobs and quickly be back to work on important inventions that will move us all forward. The industry leader for online information for tax, accounting and finance professionals. Let me tell you the bear case on Facebook, okay, the bear case on Facebook and other ad models like Google is that we're running headlong into a massive recession. ISDA fosters safe and efficient derivatives markets to facilitate And Meta certainly has abundant financial resources to invest and / or return to shareholders. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. Altimeter Capital Management partner Chris Conforti plans to leave the investment firm, according to people with knowledge of the matter. browser. Altimeter Capital is an American investment firm based in Boston, Massachusetts and Menlo Park, California. So these are different order of magnitude bets. In fact, we believe that augmented and artificial intelligence has the potential to drive more economic productivity than the internet itself. ISDA is a registered trademark of the International Swaps and Derivatives Association, Inc. The bottom line is where I wanted to start this whole interview with is you called it. GERSTNER: So let's talk for a second about what I called. Moreover, I am a strong supporter of founder-led companies especially when they have your successful track record of seeing the future. Right? I can't tell you what's going to happen the next three days or the next three weeks or even three months. About Kevin Wang. Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. What is the connection between those three companies. SPACs notched more than $70 billion so far in 2021, a new record. Despite public skepticism at times warranted we have been supporters of the companys strategy to continuously reinvest in a product-led future and its mission to make the world more open and connected. It's a better version of Zoom. Or it's well over a trillion, Microsoft 3 trillion. Round: Series D Description: Ro is a telehealth startup that operates digital health clinics for men's and women's health, along with smoking cessation. Bill McColl has 25+ years of experience as a senior producer and writer for TV, radio, and digital media leading teams of anchors, reporters, and editors in creating news broadcasts, covering some of the most notable news stories of the time.
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