According to the company’s annual report filed with the Securities and Exchange Commission, Meta (FB) bought back 21.7 million shares in October at an average price of $326.20, and in November, it purchased 21.6 million more shares, at an average price of $335.09. Lastly, in December, it bought back 14.73 million shares at an average of $329.97.
Altogether, Meta spent the final three months of 2021 buying back 58 million shares of stock at prices that might not be seen again for months, perhaps years.
As the ultimate insiders, you would think management knew how poorly the business was doing and hold off on the buybacks till they released the earnings report. Even if they didn’t know the extent of the battering, they should have guessed that stock would have been hit hard and lower prices were in the offing. So why not wait on the buybacks till after earnings release?
Occams razor. Management believed that shares were/are undervalued.
Management has a built in bias that views management as both intelligent and timely.
Insider buying and selling can be viewed as insiders knowing more about a company’s
results and plans than an outsider. However, insiders and management can also be -
well dumb and blind to the situation the market or their customer’s see.
So, while management or an insider trade may be used as a signal by other investors, there
is still a need to perform due diligence should you wish to use that data.
I always think about various managers I have worked with and for and how they were excellent
in some respects and less impressive in other respects.
Every investor needs to remember that all investments involve tiptoeing through tulips in
some aspects. Demand and supply is not always straightforward or a proper representation of
inherent value - particularly when the supply and demand of equity is in question.
I remember in the late 90’s up to the 2000’s crash, many technology companies bought back tons of their shares. They did that to support share price or were simply stupid, don’t assume anything otherwise.
This Barron’s article gives us a dollar figure for money spent buying back shares for the past two quarters by $FB management.
To be sure, the Meta story still has investor appeal, most notably a cheap stock. After the selloff, Meta trades at a discount to the S&P 500—19.3 times versus 20.3 times, respectively. Meta has also been aggressively buying back stock—$33 billion over the past two quarters. While those purchases look ill-timed, the buybacks suggest that the Meta board considers the stock cheap. That doesn’t mean it can’t get cheaper.
Meta’s risks are growing and they’re no longer just about Facebook’s legacy business. The company is spending aggressively on its metaverse build out—capital spending this year is expected to be between $29 billion and $34 billion, up from $19.2 billion last year. No one really knows if the plan will work: How many people want to attend concerts, parties, and meetings in an imaginary world while wearing a virtual reality headset? The metaverse has become CEO Mark Zuckerberg’s biggest bet—and it gives the company a quickly changing risk profile, one that looks uncomfortable even with a cheap stock.
Meta’s user base is mammoth—3.6 billion monthly active users, or close to half the Earth’s population. But growth is finally slowing, the advertising business is in trouble, regulators are circling, and the metaverse is in its infancy. For Meta, it’s a mega set of risks.
$FB threatens to pull Facebook and Instagram apps out of the EU:
(Bloomberg) – Meta Platforms Inc. has once again threatened to pull Facebook and Instagram from Europe if it is unable to keep transferring user data back to the U.S., amid negotiations between regulators to replace a scrapped privacy pact.
European Union regulators have for months been stuck in negotiations with the U.S. to replace a transatlantic data transfer pact that thousands of companies relied on, but which got struck down by the EU Court of Justice in 2020 over fears citizens’ data isn’t safe once shipped to the U.S.
In its annual report published Thursday, Meta said that if it couldn’t rely on new or existing agreements – such as so-called standard contractual clauses – to shift data, then it would “likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.”