Meta Shares Recover 21% After Layoffs: As the macroeconomic downturn, increased competition and ads signal loss have hit Meta’s revenue, its shares remained under pressure since the start of this year and have witnessed a continuous fall. However, after the reports of Meta layoffs start doing the round, the company’s shares begin recovering and the average ticket size that investors are investing in Facebook’s parent company has also improved.
Last week, on November 9, Mark Zuckerberg, CEO of Facebook’s parent company Meta Platforms, confirmed the layoffs and said the company has decided to reduce the size of its team by about 13 per cent and let more than 11,000 employees go.
At the start of this year (January 3), Meta’s shares had stood at $338.54 apiece on the US-based stock exchange Nasdaq. The stock then started witnessing a decline and continued to fall to $88.91 apiece on November 3.However, when the reports of Meta layoffs started doing the rounds amid Twitter layoffs in the first week of November, the Facebook shares started recovering and have consistently risen since then to $117.08 apiece currently (November 16) on the Nasdaq, which is around 21 per cent jump as compared with $96.47 on November 8 (a day before the layoff announcement).
Investors recommended Meta a three-step plan that will double free cash flow (FCF) to $40 billion per year and focus the company’s teams and investments — 1) Reduce headcount expense by at least 20 per cent; 2) Reduce annual capex by at least $5 billion from $30 billion to $25 billion; 3) Limit investment in metaverse/ virtual reality labs to no more than $5 billion per year.
According to data sourced from Vested Finance, an Indian brokerage firm that helps people invest in US stocks, after the layoffs were announced on November 9, investor activity in Meta’s shares has seen a sharp jump with the average ticket buy size jumping 35 per cent compared to what was recorded on November 1.
The data also showed that there was an uptick in per day average order volume by 106 per cent from October to November (basically after the Q3 announcement).
Stock market experts said there is a speculation that Meta share prices are likely to increase because the company is reducing its workforce. The company is probably sending a signal that it is now focusing on making the business profitable and reducing overhead costs.
In his letter to employees, Meta CEO Mark Zuckerberg also said in the current environment, the company needs to become more capital efficient. It has shifted more of its resources onto a smaller number of high-priority growth areas — like AI discovery engine, ads and business platforms, and long-term vision for the metaverse.
“We’ve cut costs across our business, including scaling back budgets, reducing perks, and shrinking our real estate footprint. We’re restructuring teams to increase our efficiency. But these measures alone won’t bring our expenses in line with our revenue growth, so I’ve also made the hard decision to let people go,” he added.
After the mass trimming of the workforce by Twitter and Facebook parent Meta, Amazon is also planning to lay off about 10,000 people over the next few days, according to reports.