Key Takeaways
- Meta stock had a turbulent 2022, but so far in 2023 the ‘Year of Efficiency’ which has included mass layoffs and a step back from the metaverse, has yielded positive results for shareholders
- The launch of Threads appears to be continuing this run of gains, with Meta stock up over 2% since just prior to launch and up over 135% since the start of the year
- It’s far less positive over at Twitter, with Fidelity writing down their valuation of the company from $44 billion to $15 billion, representing a loss of 65.9%
It’s been almost a week since Meta officially launched their Twitter competitor Threads, and it’s now overtaken ChatGPT as the fastest app to gain 100 million users. It took just a few days for Threads to hit the milestone, a feat which took ChatGPT around two months.
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To be fair, Meta did have a bit of an advantage given how easy they’ve made it for users to sign up, but it’s an impressive feat nonetheless.
It’s also one of the best opportunities in the social media scene we’ve seen in a number of years, giving Meta the opportunity to take users from Twitter and, the ultimate prize, their advertising dollars as well.
So how has Meta’s stock performed since the launch and how healthy is Elon Musk’s $44 billion Twitter purchase looking now?
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How has Meta stock reacted to the launch of Threads?
It’s worth first noting the context of the launch of Threads. Like most companies in tech, Meta had a terrible 2022. They overhired during the pandemic which was a common mistake in Silicon Valley, but Meta took things to another level with the billions they had been pouring into the Metaverse project.
As 2023 rolled around Mark Zuckerberg realized that they needed to make a shift, and dubbed this year the ‘Year of Efficiency.’ That meant mass layoffs and a few big steps away from the Metaverse. In fact, other than the fact the company has changed its name, we hear very little about the virtual reality world these days.
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All that is to say that 2022 was horrible for the Meta stock price, but so far this year the efficiency drive has driven a massive rebound. Year to date, the price is up over 135%.
Yes, that’s not a typo, and it’s kind of crazy to think that even with how mature Meta is as a company and social media is as an industry, it’s still possible to more than double your money in a very short space of time if you get the timing right.
The launch of Threads has helped continue this run.
The day before launch Meta’s stock jumped from $285 up to $297, and it’s been hovering at this same level in the days since, up 2.62% over the past five days. That’s important, because while this is a big opportunity for Meta, the bar is set very high.
A small startup looking to muscle in, like Mastodon or BlueSky for example, would be excused growing pains, bugs and lack of features at launch as part of trying to scale. Meta, one of the biggest companies in the world, is not going to have that luxury.
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With a huge budget and access to the best talent in the world, users are going to expect a near perfect product from launch day. So far, there don’t appear to be many complaints.
What about Twitter?
Now while Elon Musk was the man running the takeover of Twitter, he’s not the sole financier of the purchase. The $44 billion price paid for the company hasn’t come out of Musk’s personal bank account, meaning he still has investors behind the scenes that will be looking for a return on their capital.
As the company is now private, details are hard to come by, but according to The Washington Post, Musk enlisted some seriously big players to help with the Twitter buyout.
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Some of the individuals and organizations who are reported to have chipped in include the Qatar Investment Authority, Saudi Arabia’s Prince Alwaleed bin Talal al Saud, crypto trading platform Binance, venture capital funds Andreesen Horowtiz and Sequoia Capital, billionaires Larry Ellison and Jack Dorsey, plus Bank of America, Morgan Stanely, Fidelity and Barcalys.
Phew, that’s a lot of money to keep happy.
And what’s it worth now? Well Fidelity has written down the valuation of their stake in the company to a ‘measly’ $15 billion. That’s still a lot of money, but it means that under Musk’s tenure, Twitter has provided investors with a return of -65.9%. Oof.
So as of right now, Meta is soaring while Twitter is floundering. It’s going to be one to watch very carefully.
The bottom line
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Meta’s launch of Threads has gotten off to a great start, and it’s a key win for Meta shareholders as it’s a course correction back to traditional social media. The money pit called the metaverse had many investors nervous, and this plus the efficiency drive feels a bit like the ship is being steadied.
The social media landscape is going to be one to watch over the rest of 2023, as we see whether Twitter is going to collapse completely and whether Threads will prove to be a legitimate value add to revenue. Watching the details at the coming Meta earnings calls should provide clues.
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