To put that in perspective, it merely takes the company back to mid-2021 levels of employee expense and I dont think anybody would argue that Meta wasnt sufficiently staffed in 2021 to tackle a business that looks similar to how it looks today. Brenda Yester Baty, Head of Strategic Initiatives at Lennar Corp.; former SVP Revenue Management at Carnival Cruise Lines. Congrats on the new show. 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. 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. The stock today hit a new low under $3. Altimeter LLC. GERSTNER: Well, the first thing I would say is this, set aside SPAC. 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. A Division of NBCUniversal. Brad Gerstner's Phone Number and Email Last Update. Meta changed its company name from Facebook to better focus on its VR hardware and software and is spending $10 billion per year on the technology. We know Meta has more reach, more relevance, and more incredible opportunities for growth than almost any platform on the planet. It's good to see you again. Grab Holdings is reportedly in talks to go public through a merger with a "blank check" company that could value the Southeast Asian ride-hailing startup at as much as . Enjoy a 7-Day Free Trial Thru Feb 17, 2023! In a single quarter, they added 1.4 billion. It just launched in 150 countries, has over a billion views. 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. Further strengthening our own conclusions, your seemingly desperate actions yesterday appear as a transparent and cynical attempt to maintain your official privileges and power, despite your long historical record of deficient oversight on behalf of stockholders. 2-Year No matter how a company came public in 2021, let alone December of 2021, right, they've been obliterated. Altimeter Capital Management is an investment firm that operates within the technology sector. After the pandemic, hospitals are now on a strong footing. We want to hear from you. 2023 Look at another one that I know is in your book or at least it was Roblox is down 74% from its 52-week high. An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. In the back half, you've already lapped IDFA, in the back half of this year, the supply chain issues begin to ameliorate. We think this is a 3X in three years even if software multiples remain at these levels near the five-year average. They just announced that they're going to be profit, full company profitable by 2023. Drew Angerer | Getty Images News | Getty Images, Meta needs to focus on its core business, not the Metaverse, says Sand Hill's Brenda Vingiello. We don't think we're going to have 10 rate hikes and we do think there'll be an off ramp to the situation in Ukraine. But the fact of the matter is the entire market has evaporated around these types of stocks. 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. Of course, a company that connects nearly three billion users on phone and text must be investing in the next generation of communication. Superficial change in panicked response to rigorous scrutiny is hardly noble or a basis for stockholders to have confidence in your judgment. I think we spent about an hour together. You would simply do R&D quietly and investors would focus on the core business and the breakthroughs in AI. As a result, the team hastily pivoted the company toward the metaverse including a surprise re-naming of the company to Meta. 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. If you look at the company, it's now trading at $5 billion enterprise value. WAPNER: I know I know you're not happy about it. As always, we welcome the opportunity to engage in further discussions focused on this shared objective. Even excluding its large metaverse investment, Meta has gone from $15B in annual capex in 2018, 2019, and 2020 to $30B in annual capex in 2022. This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes. We have $130 oil and $6 gas at the pump. Meta reported in February that Reality Labs lost $13.72 billion in 2022. Why didn't you buy, you know, Uber at 28 bucks a share? 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. Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. UPDATE: Altimeter Capital, PAR Capital Issue Letter to United Continental Board - United Airlines Holdings (NASDAQ:UAL) - Benzinga SPY 397.68 0.74% QQQ 293.61 0.83% BTC/USD 22299.46 5.109%. Moreover, Meta has industry leading capabilities in key future technologies like artificial intelligence and immersive 3d that will help drive new products and future growth. Think about this, Scott. 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. 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. 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. Meta. Neither Altimeter, nor any of its affiliates or personnel, offers investment advisory services via the internet. Moreover, I am a strong supporter of founder-led companies especially when they have your successful track record of seeing the future. We certainly are neither short-term traders nor activists. We had given most of that up by middle of December. PLAN, Yearly If Meta was able to control those costs, he said, then it could double its free cash flow and improve its share price. The answer to that is because people are very fearful. In Q1 of 2021, everybody was sitting on their couch. How many dogs want to eat the dog food? 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. I mean, two years ago we were we were having this conversation. United Continental Holdings, Inc. Altimeter Capital Management partner Chris Conforti plans to leave the investment firm, according to people with knowledge of the matter. March 8, 2016 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. 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. Protocol: The metaverse is a shared virtual environment with aspects of online gaming, augmented reality, and more that people can access via the Internet. Right? Altimeter Capital owns about 2.46 million Meta shares. Recently Active; Top Discussions; Best Content; WSO Media; BY INDUSTRY; Investment Banking GERSTNER: Well, first let's talk about what took Facebook down, right? will trigger a new window or tab to open. Is it done? Bill Ackman's: Pershing Square Capital Management. Right. Brad Gerstner Brad, thank you. Altimeter Capital owns about 2.46 million Meta shares. And frankly, I don't think we're gonna have hyperinflation in a world where demand is being destroyed at the rate it's currently being destroyed. We have no more confidence that you will act responsibly in the future (even with yesterday's announcement) than we have evidence that you have done so in the past. The firm also considers investments in the consumer products and services, gaming, retail, and transportation sectors. GERSTNER: No, I didn't leave it out. It added that VR is "a powerful social platform and creative technology, and the more people with access to it, the better. We also reference original research from other reputable publishers where appropriate. If the deal goes through, it. The changes for the Quest 2 begin Sunday, March 5. Warren Buffett's: Berkshire Hathaway. It's also a vote of less confidence about the company's ambitions in the world of virtual and augmented reality. GERSTNER: Scott, I love that you asked the question. That stuff was being advertised on Instagram. This Supreme Court Case Could Redefine Crime, YellowstoneBackers Wanted to Cash OutThen the Streaming Bubble Burst, How Countries Leading on Early Years of Child Care Get It Right, Female Execs Are Exhausted, Frustrated and Heading for the Exits, More Iranian Schoolgirls Sickened in Suspected Poisoning Wave, No Major Offer Expected on Childcare in UK Budget, Oil Investors Get $128 Billion Handout as Doubts Grow About Fossil Fuels, Climate Change Is Launching a MutantSeed Space Race, This Former Factory Is Now New Taipeis Edgiest Project, What Do You Want to See in a Covid Memorial? He defied expectations and made profits on Priceline, Expedia, Uber, Twilio, and Hubspot. Ro $500.0M. This is a hard game. WAPNER: We're back now with Altimeter Capital's Brad Gerstner hanging out with us at "Overtime" today, You know, we talked about the magnitude Brad by which some of these stocks have come down and I'm looking at the, listen, it's not just Meta, obviously. We'll see you soon. What's going to be the inflation print in April? I'm not a seller. 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. This heavy equipment maker is a good buy on dips stock; heres why, Tears from smokeless cooking gas as consumers continue to bear price hikes on top of subsidy cuts. That's what makes markets. So were Shopify's and so were PayPal. GERSTNER: Without a doubt the single biggest lever on growth multiples is rates. 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As you know, we have attempted to work collaboratively with the current Board to meaningfully improve governance, Board composition, and oversight. We dont have any demands. Brad Gerstner is the Founder & Chief Executive Officer at Altimeter Capital based in Boston, Massachusetts. "In short, Meta needs to get fit and focused.". The conventional wisdom press and investor is that the core business hit a wall last fall. Welcome to "Overtime.". Panel led by former SC judge to include NaBFID chair KV Kamath and Infys Nandan Nilekani. Will His AI Plans Be Any Different? Kultura Capital Management is being structured as a hybrid fund that will focus on late-stage tech startups as well as public companies, the person said. At the end of the second. Altimeter Feb 2021 - Present2 years 2 months New York, United States Chris is a Partner at Altimeter on the private investing team where he focuses on investing in iconic late stage technology. The Singaporean rideshare giant Grab is set to merge with the SPAC Altimeter Growth 1, according to a report from The Financial Times. Meta Platforms, which is set to report third-quarter results on Wednesday after markets close, declined to comment. We've destroyed over $15 trillion of stock market wealth. We're not in the business of being long or short bonds generally I'd put them on as a hedge against our growth exposure. As you know, we are long-term shareholders. Whatever the reason, that is certainly the perception. 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 annual investment in the metaverse to $5 billion instead of the current $10 billion. Reels, which is a massive product is going to increase its monetization between now and the end of the year. Is it all about rates at this point, especially when you're talking about the kinds of vulnerable stocks that we've really had front and center, those being tech? Meta and other large companies have made it very difficult for start-ups to hire. About Altimeter Capital Can they maintain their growth momentum? Hedge Fund Manager. Chicago, IL 60606 An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. ISDA fosters safe and efficient derivatives markets to facilitate Copyright 2023 Bennett, Coleman & Co. Ltd. All rights reserved. Email. Over the last three years, Meta has also dramatically increased its capital expenses. c/o Chairman Henry L. Meyer III And so we add on a fair amount of exposures we entered this year. A letter addressed to Zuckerberg and the board of directors was published on Oct. 24. Our best guess is that maintenance capex for Meta is less than $10B annually. I said IDFA which is the Apple changes right? We were wrong. WAPNER: I hear you. Prior to Octahedron, Ram was a partner and portfolio manager at Altimeter Capital, a multi-billion dollar investment firm . 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. We do not take job reductions lightly. Metas core business is one of the largest and most profitable in the world with over $45 B in operating profits last year alone. The full text of the stockholder letter to the United Board follows: March 8, 2016. Benzinga does not provide investment advice. Industry Trends on 4000+ Stocks, Pro Investing by Aditya Birla Sun Life Mutual Fund, Canara Robeco Equity Hybrid Fund Direct-Growth, Cut workforce, spending on metaverse, key investor tells Mark Zuckerberg. 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. To set a new and better course for the Company, and to give United stockholders the opportunity to elect the Board they deserve, Altimeter has delivered to you a notice today indicating its intention to nominate six highly qualified professionals led by former Continental Airlines CEO Gordon Bethune to the United Board at the 2016 annual stockholder meeting. Why 20%? Instead, the company has announced investments of $1015B per year into a metaverse project that largely includes AR / VR / immersive 3D / Horizon World and that it may take 10 years to yield results. Meta can get its mojo back, says Brad Gerstner, but it will have to take some hard decisions first. Popular Searches. JavaScript in your web browser. Moreover, I am a strong supporter of founder-led companies especially when they have your successful track record of seeing the future. At $20-$25B of annual capex, Meta will still be investing market leading amounts to help invent the future of AI. WAPNER: Speaking of going higher up, you see what interest rates are doing today after sitting in a tight spot, they've started to move to 11. Credit Derivatives Determinations Committees, how to enable Search ISDA ISDA fosters safe and efficient derivatives markets to facilitate effective risk . By Altimeter Capital $750M Venture Capital in Feb, 2021 VROOM E-Commerce +2 Total funding $1.2B in 10 rounds from 15 investors By Altimeter Capital $50M Series E in Sep, 2016 Wingz Networking +3 Total funding $13.7M in 4 rounds from 36 investors By Altimeter Capital $11M Series B in Jan, 2016 We also believe Metas investment in AI will lead to exciting and important new products that can be cross-sold to billions of customers. Stock Radar: 19% from Budget Day! There is no doubt that doubling annual FCF will improve share price. Dont miss out on ET Prime stories! To put it in perspective, Roblox was a couple percent position for us, right, and Snowflake was a 30% position for us. So I am very unhappy because I've lost money on the deal. Altimeter manages a long / short public equity fund and private growth equity funds. Unlock your 30 days free access to ETPrime now. And frankly, they weren't a very good hedge because bonds haven't moved all that much but gross stocks are down 60, 70, as you mentioned, down over 80%. Altimeter Growth Corp. raised $450 million in an October 2020 IPO. ISDA is a registered trademark of the International Swaps and Derivatives Association, Inc. 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. To accomplish this goal, we recommend a three step plan that will double FCF to $40 B per year and focus the companys teams and investments: Getting Fit Headcount Reduction / Expense Control. And so, for our LPs, the bet is simple. Before we we move, what do I do with Facebook? Read More . And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. And so that will be rolled out in Q2 and Q3. But you also (sometimes) capitalize the first word of a quote. ", Twitter. They are people with families and kids to support. Meta (Facebook) Begins Biggest Layoffs in Company's History, Meta (META) Connect Conference Key Takeaways, Meta (Facebook) Shares Slammed as Earnings, Spending Disappoint. 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. BRAD GERSTNER: Hey, Scott, thanks for having me. At the start of COVID on March 26th when I felt about like I do today, growth stocks were under assault. Altimeter Capital Management, LP It's down 32% in the last 11 months ,that ranks it in the top three of the last 20 years in terms of drawdowns. 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. A securities lawyer, Brad Gerstner graduated from HBS in 2000 and joined General Catalyst. If they do it, I think the stock can be up over 50% between now and the end of the year. At Meta, the number of employees is up over 3x from 25k to 85k employees in just the last four years! 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", It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people. Our contact information, solely for purposes of this Adherence Letter (and unrelated to the Questionnaire delivery options in the subsequent section) is: We consent to the publication of a conformed copy of this letter by ISDA and to the disclosure by ISDA of the contents of this letter. Rodney O'Neal, former CEO of Delphi Automotive; former board member of Delphi Automotive, Sprint, and Goodyear; Can it possibly be worth a trillion? The silver lining is that unlike many companies, this popular narrative obscures the truth. 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. Ultimately, Gerstner said, Meta has too many people and is spending too much on capital expenditures. 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. is Altimeter's only website. Meta changed its company name from Facebook. 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