Investopedia requires writers to use primary sources to support their work. 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. To read full story, subscribe to ET Prime, Billed annually at He joins me live. Rapid mobile adoption helped market leaders blaze through the s-curve with astounding growth rates and a historically low cost of capital made investments in people and things the rational economic decision. Altimeter Capital Management is an investment firm with offices in Menlo Park, CA, and Boston, MA. 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. Whatever the reason, that is certainly the perception. 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. Facebook parent Meta Platforms (META) announced that it would reduce selling prices for its Quest virtual reality (VR) headsets. What Does Metaverse Mean and How Does This Virtual World Work? 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. Brad, thank you. All Rights Reserved. A securities lawyer, Brad Gerstner graduated from HBS in 2000 and joined General Catalyst. United has a Clear Record of Sustained and Substantial Underperformance: Despite premier, industry-leading strategic assets such as significant scale advantages, strong brand recognition, hubs in key business markets, and membership in the largest global airline alliance United has been the worst-performing U.S. airline stock over the last five years. As I look at it, the market is now pricing in at least seven rate hikes. 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. It's also a vote of less confidence about the company's ambitions in the world of virtual and augmented reality. 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. We certainly our base case, as you know, was a soft landing four to five rate hikes into this year. We simply wanted to further engage and continue sharing our thoughts as an interested shareholder. But what is the right amount? . 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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. And so for us, it's about simplification, reduction of gross and making sure that you consolidate that what you own into your highest conviction ideas whether you're playing at home in your 401k or whether you're doing this professionally. 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. Benchmark Reform and Transition from LIBOR InfoHub, Use of Chinese Government Bonds as Margin, Updated OTC Derivatives Compliance Calendar, ISDA-Clarus RFR Adoption Indicator: January 2023. 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. The conventional wisdom press and investor is that the core business hit a wall last fall. United Urgently Needs a Course Correction: United's stockholders, customers, and employees deserve better Board governance, better Board leadership, and better Board performance. Despite public skepticism at times warranted we have been supporters That's the asymmetry. Conclusion A Leaner, Faster, More Successful Meta. Meta didn't immediately respond to a request for comment. 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. ISDA fosters safe and efficient derivatives markets to facilitate Whether it is making Whatsapp more seamless or making content and ads more useful on Instagram, Reels and Facebook AI is a globally scarce resource that already is driving noticeable improvements for Metas three billion customers and advertisers. Data is a real-time snapshot *Data is delayed at least 15 minutes. Altimeter Growth Corp. 2 raised $400 million in a January IPO. Meta and other large companies have made it very difficult for start-ups to hire. Brad Gerstner is the Founder & Chief Executive Officer at Altimeter Capital based in Boston, Massachusetts. In short, Meta needs to get fit and focused. 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. Rodney O'Neal, former CEO of Delphi Automotive; former board member of Delphi Automotive, Sprint, and Goodyear; Remember last year they gave a guide at the beginning of the year they're going to grow at 80%. I just happen to look at a Snowflake it's in front of me and because it's your largest position, I say can Snowflake really get back to its 52-week high of $405 a share. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. We know they have high EBITDA margins on the rideshare business which is dominant across the region. Meta stock is down over 61% in 2022. Crowdfunding is the use of small amounts of capital from a large number of people to raise money or fund a business. Dear Chairman Meyer and Board Members: The silver lining is that unlike many companies, this popular narrative obscures the truth. 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. Board of Directors c/o Chairman Henry L. Meyer III United Continental Holdings, Inc. . With all of this said, we truly believe that the company should be making some of these important investments. We believe the future lies in AI. Brad Gerstner founded the. Meta can get its mojo back, says Brad Gerstner, but it will have to take some hard decisions first. 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. Altimeter's nominees are: Sign up for free newsletters and get more CNBC delivered to your inbox. Learn the pros and cons of crowdfunding. Credit Derivatives Determinations Committees, how to enable . We know Meta has more reach, more relevance, and more incredible opportunities for growth than almost any platform on the planet. 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. It's a better version of Messenger. We have not made this difficult decision lightly, but after thorough, serious, and objective analysis, we feel compelled to act. GERSTNER: Right Scott so that you know I started off by saying you know we've been beaten up this year like everybody else because I was covering shorts as we approach the five-year average. And notably, this decline in share price mirrors the lost confidence in the company, not just the bad mood of the market. 3. "Bloomberg Opinion" columnists offer their opinions on issues in the news. Dont miss out on ET Prime stories! Altimeter Capital Management, LP ("Altimeter") is an SEC-registered investment adviser. So first, you need to understand why did we see a deceleration of revenue because that informs why we're going to see a reacceleration in the back half of this year. What do you think? And now we've shot right through the five-year average. By any normal company or start up standard, $5 B per year would seem like an extraordinary amount. Focusing the Metaverse: the Next Generation of Communication and Collaboration. 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. 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. We want to hear from you. Prior to Octahedron, Ram was a partner and portfolio manager at Altimeter Capital, a multi-billion dollar investment firm . 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. Altimeter Capital owns about 2.46 million Meta shares. Activist investor Brad Gerstner, founder and CEO of tech-focused hedge fund Altimeter Capital, sent an open letter to CEO Mark Zuckerberg in October calling for a pullback in metaverse spending. In the last 18 months, Meta stock is down 55% (compared to an average of 19% for its big-tech peers). You got a lot of this right but multiples have come down a heck of a lot to this point. This is a company that only did 1.2 billion in revenue last year. "Time to Get Fit an Open Letter from Altimeter to Mark Zuckerberg (and the Meta Board of Directors).". Can it possibly be worth 100 billion? Brad Gerstner, Altimeter's chair who encouraged aggressive investment in artificial intelligence, said the firm wanted to engage with Meta and did not have any demands. The move comes amid a decline in Meta's VR shipments and pressure from activist shareholders to improve the financial picture of its metaverse division. ET on GuruFocus.com Builders Union LLP Buys AppLovin Corp, Match. Think about this, Scott. 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. AGCUU went public at $10 on Oct. 1, and closed Tuesday at $11.80. At the same time that Meta ramped up spend, you lost the confidence of investors. [2] The firm focuses on technology investments in both public and private markets globally. WAPNER: I wanna, I want to take a break and get into some of those names of all four but before I do that lastly, you mentioned very interestingly that you've taken your bond short off. 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. Altimeter was founded in 2008 and is headquartered out of Boston, Massachusetts. The letter is the latest sign that Meta investors are starting to express reservations about the company's recent performance. As such, we think during this period of growth transition and economic uncertainty, the company should decrease capex by at least $5B and maintain this discipline until revenues re-accelerate bringing our capex as a percentage of revenue more in line with our large cap peers. Meta shares moved 6% higher following the announcement. Can it possibly be worth a trillion? Getting Fit Headcount Reduction / Expense Control. Form of Letter Agreement between the Registrant, the Sponsor and each director and executive officer of the Registrant. To put that in perspective, excluding your large metaverse investment, Meta is investing more in capex than Apple, Tesla, Twitter, Snap, and Uber combined! 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. Conforti plans to join a new firm as a co-founder with. We simply wanted to further engage and continue sharing our thoughts as an interested shareholder. Musk Made a Mess at Twitter. Everybody knows we've been in this company for a long time. Got a confidential news tip? We think this is a 3X in three years even if software multiples remain at these levels near the five-year average. ISDA fosters safe and efficient derivatives markets to facilitate ISDA is a registered trademark of the International Swaps and Derivatives Association, Inc. Why didn't you buy, you know, Uber at 28 bucks a share? I think the only debate is what is the multiple going to be in three months, in six months, in nine months. On Oct. 11, Meta announced a new high-end VR headset, the Quest Pro. Altimeter Capital Management LP lifted its position in shares of SEA by 128.0% during the first quarter. ", Medium.com. An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. At Meta, the number of employees is up over 3x from 25k to 85k employees in just the last four years! BRAD GERSTNER: Hey, Scott, thanks for having me. Right. Link to 13F filings: SEC filings Some companies require tremendous capex investment to maintain their existing business. International Swaps and Derivatives Association. As always, happy to connect with you and your team. Accept. 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. Following is the unofficial transcript of a CNBC exclusive interview with Altimeter Capital Founder & CEO Brad Gerstner on CNBC's "Closing Bell: Overtime" (M-F, 4PM-5PM ET) today, Monday, March 14th for the premiere. There is no doubt that doubling annual FCF will improve share price. The technology-focused hedge fund with a 0.1% ownership claimed that the company had lost investor confidence as it increased . Altimeter is focused on technology investment, and has found multi-billion-dollar success. The bet . Of course, a company that connects nearly three billion users on phone and text must be investing in the next generation of communication. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Right. Can it possibly be worth 200 billion? Our six nominees have the necessary skills, leadership abilities, and relevant experience to catalyze a United course change and to help the Company realize its immense potential. And, while that ultimately is an important long-term measure of success for all of Metas stakeholders, it would be imprudent to make short-term bad decisions just to improve the share price. Altimeter Capital Chair and CEO Brad Gerstner said in an open letter to the company and CEO Mark Zuckerberg on Monday that Meta has too many employees and is moving too slowly to retain the confidence of investors. We further understand that ISDA assigned a unique identification code or ALID to each adherence letter that was accepted for the August 2012 Protocol or the March 2013 Protocol and that, in order to amend a Protocol Covered Agreement pursuant to: (i) Appendix 1 to this Protocol (which is intended to top up agreements made pursuant to the August 2012 Protocol), we must provide our August 2012 Protocol ALID below; or (ii) Appendix 2 to the Protocol (which is intended to top up agreements made pursuant to the March 2013 Protocol), we must provide our March 2013 Protocol ALID below: 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. Consumer confidence is plummeting. Do they want to stand with me and ride that out? Your Reason has been Reported to the admin. Unlock your 30 days free access to ETPrime now. Meta. We want to hear from you. My bet is we're gonna have less this year. 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. 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: Reduce headcount expense by at least 20%;Reduce annual capex by at least $5 B from $30B to $25B; andLimit investment in metaverse / Reality Labs to no more than $5B per year. The facts are startling. CNBC Exclusive: CNBC Transcript: Altimeter Capital Founder & CEO Brad Gerstner Speaks with CNBC's Scott Wapner on "Closing Bell: Overtime" Today Published Mon, Mar 14 20225:56 PM EDT Share. Brad Gerstner Rapid mobile adoption helped market leaders blaze through the s-curve with astounding growth rates and a historically low cost of capital made investments in people and things the rational economic decision. 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. Its founder faces criminal and civil charges and goes to trial in October. It added that VR is "a powerful social platform and creative technology, and the more people with access to it, the better. Email. At Meta, the number of employees is up over 3x from 25k to 85k employees in just the last four years! 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. FTX, once the third-largest centralized cryptocurrency exchange, is now in U.S. bankruptcy. About Kevin Wang. Are you as optimistic today as you were in months past? Tina Sharkey, CEO of SherpaFoundry; former board member of HomeAway; and In a single quarter, they added 1.4 billion. Meta (Facebook) Begins Biggest Layoffs in Company's History, Meta (META) Connect Conference Key Takeaways, Meta (Facebook) Shares Slammed as Earnings, Spending Disappoint. Chase Coleman's: Tiger Global Management. Capital October 20, 2022 Risk & Capital. At the start of COVID on March 26th when I felt about like I do today, growth stocks were under assault. The full text of the stockholder letter to the United Board follows: March 8, 2016. Barney Harford, former CEO of Orbitz Worldwide; former board member of Orbitz Worldwide and eLong; These are not numbers on a spreadsheet. JavaScript in your web browser. Contact. 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. Can you tell me where that stands now and how you view stocks like that that have gotten absolutely obliterated? In fact, in the most recent quarter, they added 1.4 billion of contracted value. So take Snowflake as an example. 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. Meta has also been feeling pressure to improve the finances of its Reality Labs, the company's metaverseunit, which includes the VR headsets. We did not see this talk of 10 rate hikes and we certainly didn't see a war developing in Europe. We certainly are neither short-term traders nor activists. That's because enterprises love their product. Our best guess is that maintenance capex for Meta is less than $10B annually. Altimeter Capital owns about 2.46 million Meta shares. As a result, the team hastily pivoted the company toward the metaverse including a surprise re-naming of the company to Meta. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. "New Prices for Meta Quest 2s 256GB SKU + Meta Quest Pro. In the letter, Gerstner said Altimeter Capital doesn't have demands and simply wants to engage with Meta management. But you also (sometimes) capitalize the first word of a quote. If the deal goes through, it. It can do that by making. Where's your exposure today? 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. You would simply do R&D quietly and investors would focus on the core business and the breakthroughs in AI. 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. But I think if you have a time horizon over the course of the one to three years, we see a lot of stocks in our universe that we not only think are going to end the year higher, but we think are going to be multiples higher as we look out over the next two to three years. Usually you don't capitalize after a colon, but there are exceptions. Meta and other large companies have made it very difficult for start-ups to hire. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Is it done? At the same time that Meta ramped up spend, you lost the confidence of investors. The firm also considers investments in the consumer products and services, gaming, retail, and transportation sectors. PAR Capital Management, Inc. Do Not Sell My Personal Data/Privacy Policy. Altimeter said such huge investments "in an unknown future is super-sized and terrifying, even by Silicon Valley standards". We worked hard on the deal and the timing was horrific. Meta stock is down over 61% in 2022. What is the metaverse and why are billions of dollars being spent on it? I mean, two years ago we were we were having this conversation. And, while most companies will struggle to monetize AI, we believe Meta is incredibly well positioned to leverage AI to make all of its existing products better. I don't think there's any chance that the Fed is going to raise rates 10 times this year. 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. Like many other companies in a zero rate world Meta has drifted into the land of excess too many people, too many ideas, too little urgency. 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. Meta Platforms CEO Mark Zuckerberg speaks about the Facebook News feature at the Paley Center For Media in New York on Oct. 25, 2019. So we're in the neighborhood of a tradable bottom. Southeast Asia's largest ride-hailing company, Grab Holdings, said Tuesday that it plans to merge with U.S.-based Altimeter Growth Capital in a deal that would value it at nearly $40 billion and . It's our largest position in the book. It's my job to ask you about it knowing you're not happy about it and you answered the question. It did not specify which of Alitmeter's SPACs Grab was in talks with. This is a business it's trading at 12 times free cash flow, X the meta investment and 18 times including. Altimeter Capital Management, LLC. Meta. Limit investment in metaverse / Reality Labs to no more than $5B per year. It said Grab is expected to raise between. "In addition, people are confused by what the metaverse even means," Gerstner wrote. I think that this is a business that is investing in the right things. That's what makes markets. 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. I think you're gonna see monetization gains against IDFA and either way we lap that issue in Q3 and Q4. 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. All Rights Reserved. Revenue. We were wrong. We have $130 oil and $6 gas at the pump. effective risk management for all users of derivative products. All quotes delayed a minimum of 15 minutes. Louis Bacon's: Moore Capital Management. Ro $500.0M. Altimeter Growth Corp. raised $450 million in an October 2020 IPO. HONG KONG (AP) Southeast Asia's largest ride-hailing company, Grab Holdings, said Tuesday that it plans to merge with U.S.-based Altimeter Growth Capital in a deal that would value it at . In Q1 of 2021, everybody was sitting on their couch. 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. We do not take job reductions lightly. To put that in perspective, excluding your large metaverse investment, Meta is investing more in capex than Apple, Tesla, Twitter, Snap, and Uber combined! Today, the cost of capital has radically changed, and so has Metas growth rate. The Meta investor recommends a plan to get the company's "mojo back.". Moreover, I am a strong supporter of founder-led companies especially when they have your successful track record of seeing the future. Conclusion A Leaner, Faster, More Successful Meta. 2499 1749, Monthly 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.