Skip to main content. It did not specify which of Alitmeter's SPACs Grab was in talks with. Meta shares moved 6% higher following the announcement. Or it's well over a trillion, Microsoft 3 trillion. Prior to Octahedron, Ram was a partner and portfolio manager at Altimeter Capital, a multi-billion dollar investment firm . Drew Angerer | Getty Images News | Getty Images, Meta needs to focus on its core business, not the Metaverse, says Sand Hill's Brenda Vingiello. So the way companies have to get there is by growing their top line and growing their bottom line, the answer as to all companies many most certainly will not. In fact, we believe that augmented and artificial intelligence has the potential to drive more economic productivity than the internet itself. 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. Investopedia requires writers to use primary sources to support their work. Altimeter Capital's Brad Gerstner Issues Open Letter to Meta (META) and Mark Zuckerberg Article Related Articles ( 4) Stock Quotes (1) October 24, 2022 8:20 AM EDT Tweet Share E-mail Get. Do they want to stand with me and ride that out? Altimeter Capital launched its two SPACs in October and January, raising a combined $850 million between the two blank-check vehicles. The cumulative benefit of the recommended adjustments outlined above would increase FCF by at least $20B in 2023 ($10B from people-related expense reduction, $5B from capex reduction, and $5B from reduced metaverse spend). Ro $500.0M. If the deal goes through, it. JavaScript in your web browser. All quotes delayed a minimum of 15 minutes. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. WAPNER: So let me talk about your overall exposure if I if I could because by last December, you had said you had taken most of your your shorts off and your long exposure was back up to 70%. If you have a two-to-three-year time horizon, there is no doubt there are a lot of stocks that are going to be up well over 100% off this bottom. Form of Letter Agreement between the Registrant, the Sponsor and each director and executive officer of the Registrant. Now they've told us that they're going to achieve 15% free cash flow margins this year, five years early, right, while still growing 100%. effective risk management for all users of derivative products. At the end of the second quarter this year, Altimeter Capital held more than 2 million shares of Meta. We want to hear from you. GERSTNER: Without a doubt the single biggest lever on growth multiples is rates. I remember people asking that question about Amazon. International Swaps and Derivatives Association. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. A Division of NBCUniversal. Altimeter Capital Management is an investment firm with offices in Menlo Park, CA, and Boston, MA. Email. We can just go through the list, Uber, Facebook, Roblox. Protocol: Meta didn't immediately respond to a request for comment. At Meta, the number of employees is up over 3x from 25k to 85k employees in just the last four years! 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. Tesla recalls 3,470 Model Y vehicles over loose bolts, Exclusive: Nvidia's plans for sales to Huawei imperiled if U.S. tightens Huawei curbs-draft, Reporting by Akash Sriram in Bengaluru; Editing by Arun Koyyur and Anil D'Silva, Mexico can't match U.S. incentives for proposed Tesla battery plant, minister says, Taiwan's TSMC to recruit 6,000 engineers in 2023, Exclusive: Snapchat kicks few children off app in Britain, data given to regulator shows, Exclusive news, data and analytics for financial market professionals. The conventional wisdom press and investor is that the core business hit a wall last fall. By any normal company or start up standard, $5 B per year would seem like an extraordinary amount. When exactly did you determine that the Board was so inadequate as to need four new directors, all at once, and without an annual meeting or a stockholder vote? In our view given United's valuable and industry-leading strategic asset base this long-term underperformance directly results from an underqualified, ineffective, complacent, and entrenched Board. Bruce Berkowitz's: Fairholme Capital Management. I don't think stocks today reflect a great price discovery about where these stocks are going to be in six months, let alone two years, but I'm also eyes wide open to the fact that we could go lower before we go higher. Time to Get Fit an Open Letter from Altimeter to Mark Zuckerberg (and the Meta Board of Directors) | by Brad Gerstner @altcap | Medium 500 Apologies, but something went wrong on our end.. GERSTNER: So, Scott that you know the top six names in our book are all companies that we believe are, you know, both accelerating, expanding margins, expanding free cash flow margins, right, and that are critically important and will be worth more in the future. What Does Metaverse Mean and How Does This Virtual World Work? After all, why not hire more people and invest in more things when the cost of capital was near zero and growth seemed unlimited? CAPEX Investing Aggressively and Responsibly in the Future of AI. United has an Underqualified, Ineffective, and Entrenched Board: While presiding over United's stunning long-term underperformance, we believe that the incumbent Board (and a majority of the newly-expanded 15-person Board): (1) lacks sufficient leadership, expertise, and experience to challenge management and hold management accountable, to direct an operational and financial turn-around, and to maximize stockholder value; (2) has entrenched itself by implementing various mechanisms to financially penalize stockholders for making meaningful Board changes; (3) has failed to adequately align management compensation with stockholder interests; and (4) is too stale to effectively represent stockholders. A securities lawyer, Brad Gerstner graduated from HBS in 2000 and joined General Catalyst. Tina Sharkey, CEO of SherpaFoundry; former board member of HomeAway; and We believe the future lies in AI. 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%. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Focusing the Metaverse: the Next Generation of Communication and Collaboration. We did not see this talk of 10 rate hikes and we certainly didn't see a war developing in Europe. Chief Executive Officer This would double annual FCF and put FCF as a percentage of revenue more in line with Google, Microsoft, and Apple. The metaverse is a shared virtual environment with aspects of online gaming, augmented reality, and more that people can access via the Internet. 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. 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. Altimeter Capital Management is an investment firm that operates within the technology sector. But the company's dreams have fallen short as the Reality Labs unit, which works on augmented and virtual reality, has continuously reported staggering losses. ET on GuruFocus.com Builders Union LLP Buys AppLovin Corp, Match. What is the rate of increase? An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. Now that's what's going on in the business so all those people writing rest in peace epitaphs for Facebook are going to have to deal with that acceleration. Superficial change in panicked response to rigorous scrutiny is hardly noble or a basis for stockholders to have confidence in your judgment. 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. Background [ edit] In 2008, Brad Gerstner founded Altimeter Capital in Boston, Massachusetts. Meta Platforms (META) shares jumped 6% after the tech giantannouncedbig price cuts for its virtual reality (VR) headsets. Chief Executive Officer Sign up for free newsletters and get more CNBC delivered to your inbox. Comprender el funcionamiento social, poltico, econmico, cultural y natural de la sociedad a fin de reflexionar, hacer propuestas y asumir compromiso en torno a las polticas de desarrollo nacional, local y regional en el mbito del respeto de los derechos humanos, la integracin econmica y la convivencia social, bajo una concepcin de desarrollo humano sostenible. The Digital Markets Act (DMA) is a groundbreaking European law designed to rein in the power of the gatekeepers of the digital economy. Those three companies are all down that amount because it turns out that this year people got off their couch, they went out and they went to restaurants and they went in and did things instead of buy things. NEW YORK, Nov. 16, 2021 (GLOBE NEWSWIRE) -- H1, which provides the largest global healthcare network that connects healthcare professionals, announced today that it has raised a $100M Series C. Hedge Fund Manager. A newly launched P2E adventure game, Chronos: Dawn of Tie, has introduced a series of brand-new PvP elimination tournaments.Last month, the whimsical battle game organized its beta stage featuring selected players. 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. +Includes DocuBay and TimesPrime Membership. Of course, a company that connects nearly three billion users on phone and text must be investing in the next generation of communication. I think, or inflation, I think they're behind the curve on recession. 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 . We know they have high EBITDA margins on the rideshare business which is dominant across the region. Search ISDA ISDA fosters safe and efficient derivatives markets to facilitate effective risk . Our Standards: The Thomson Reuters Trust Principles. Got a confidential news tip? There isnt a day that goes by where I dont find myself using Metas products to communicate, to connect, and to entertain still amazed at the power of these services. articles a month for anyone to read, even non-subscribers! 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. Recently Active; Top Discussions; Best Content; WSO Media; BY INDUSTRY; Investment Banking So you know, when I look at what's going on in the business and I try to distill it from the noise, which is what has made us good for 20 years, not following the crowd, not panicking, but really looking at the business. 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. The company has lost investor confidence as it ramped up spending and pivoted to the metaverse, the technology-focused hedge fund with a 0.1% stake said, and suggested a three-step plan. Altimeter's nominees are: 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. 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. 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. August 2012 Protocol ALID: 66703 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. 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. According to Hedge Follow, it was authored by Brad Gerstner, CEO and founder of technology investment firm Altimeter Capital. So if you want to bet on the future of growth, Southeast Asia is one of the places you want to bet this is one of the dominant brands, dominant internet platforms, and it's got 7 billion of cash on the balance sheet. 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. 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. 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. 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. We have no stimulus checks. The silver lining is that unlike many companies, this popular narrative obscures the truth. On Oct. 11, Meta announced a new high-end VR headset, the Quest Pro. Altimeter Growth Corp. 2 raised $400 million in a January IPO. Its competitor or not its competitor, its closest comp in Southeast Asia Sea Limited is also down over 70%. When you were with me in December, you said that you had picked some more of that up along with Snowflake. Nobody debates whether or not this company is going to be more valuable in the future. In short, Meta needs to get fit and focused. The Meta investor recommended a plan to get the company's "mojo back," including reducing headcount expenses by 20% and limiting the company's pricey investments in "metaverse" technology VR software and hardware to no more than $5 billion per year. The stock today hit a new low under $3. This company is perfectly positioned to capitalize on that they have the, the ad network to monetize it. What is the connection between those three companies. 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. We agree to pay a one-time fee of $500 to ISDA at or before the submission of this Adherence Letter. Altimeter is based in California and has about $16 billion in . This is a business it's trading at 12 times free cash flow, X the meta investment and 18 times including. Frankly, if I was Sea Limited, if I was Uber, I might be looking at consolidating the business. Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. The answer to that is because people are very fearful. 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. 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. Facebook's revenues in Q1 were lower than people expected. 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. browser. So I think they got to match the investment to the revenue growth of the business. b***@altimeter.com. Welcome to "Overtime.". Today, the cost of capital has radically changed, and so has Metas growth rate. After all, why not hire more people and invest in more things when the cost of capital was near zero and growth seemed unlimited? Musk Made a Mess at Twitter. Choose your reason below and click on the Report button. There is no doubt that doubling annual FCF will improve share price. $6.9 M. Congrats on the new show. Are you as optimistic today as you were in months past? 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. Login Includes DocuBay and TimesPrime Membership. About Altimeter Capital Altimeter is a leading technology focused investment firm based in Silicon Valley with over $15 billion in assets from endowments, foundations, and family offices. But listen, there's massive uncertainty in the world. WAPNER: Let me lastly ask you about Grab, the SPAC deal you did, biggest SPAC deal ever of $40 billion. Gordon Bethune, former CEO of Continental Airlines; board member of Honeywell, Prudential Financial, and Sprint; 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. So were Shopify's and so were PayPal. It takes effect in 2023. But Meta needs to get its mojo back. Barney Harford, former CEO of Orbitz Worldwide; former board member of Orbitz Worldwide and eLong; What do you think? The letter is the latest sign that Meta investors are starting to express reservations about the company's recent performance. We believe the future lies in AI. It makes no sense to me, but that is the risk that you run. . Brad Gerstner founded the. The Meta investor recommends a plan to get the company's "mojo back.". 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. 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. 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. They just announced that they're going to be profit, full company profitable by 2023. 9/29/2022 1:05 AM. We also reference original research from other reputable publishers where appropriate. How big is that market? This is a region of 700 million plus people. Altimeter Capital. The letter is the latest sign that Meta investors are starting to express reservations about the company's recent performance. ", Medium.com. It's a better version of Messenger. c/o Chairman Henry L. Meyer III Updated on September 30, 2022. "New Prices for Meta Quest 2s 256GB SKU + Meta Quest Pro. This is a business it's grown, it's trading at 28 times free cash flow with 20% growth, that will continue to compound. Popular Searches. 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. Accept. We also believe Metas investment in AI will lead to exciting and important new products that can be cross-sold to billions of customers. We've destroyed over $15 trillion of stock market wealth. I'll acknowledge that Roblox and other names like that are in a much smaller, are in a much more perilous position in this market because they're not generating as much free cash as some of these other companies that I already mentioned. 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. Let me tell you the bear case on Facebook, okay, the bear case on Facebook and other ad models like Google is that we're running headlong into a massive recession. Brad, thank you. Ray Dalio's: Bridgewater Associates. Altimeter and PAR believe these experienced professionals can bring meaningful experience, objective oversight, and powerful change to United. Getting Fit Headcount Reduction / Expense Control. Please refer to the section on cookies in our Website Privacy Policy It was being purchased on the Shopify platform and people were using PayPal to check out. Every company I talked to is tightening its belts. Altimeter. At the end of the second. Mark Zuckerberg is a self-made billionaire and the CEO of Meta (formerly Facebook), which he co-founded in his dorm room in 2004. It has 24 billion in free cash they're going to generate this year. Where's your exposure today? We have little doubt investors and others would happily support scaling up these investments as the ROI becomes more tangible even if still long-term. Samooha, a startup developing a "cross-cloud" data collaboration platform, today announced that it raised $12.5 million in a funding tranche backed by Altimeter Capital and Snowflake Ventures . Share Your Design Ideas, New JerseysMurphy Defends $10 Billion Rainy Day Fund as States Economy Slows, This Week in Crypto: Ukraine War, Marathon Digital, FTX. 2023 International Swaps and Derivatives Association, Inc. I think you're gonna see monetization gains against IDFA and either way we lap that issue in Q3 and Q4. How big are the margins, ultimately Snowflake will be worth a lot more because there is almost endless demand for the product and this is a business that is highly profitable. So take Snowflake as an example. Nov. 16, 2021 at 2:38 p.m. 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: Right. Consumer confidence is plummeting. 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. We worked hard on the deal and the timing was horrific. And what is going to be the resolution to the situation in the Ukraine? "Meta Reports Fourth Quarter and Full Year 2022 Results," Page 10. Market Research. As such, we would encourage the company to move aggressively and cut at least 20% of employee-related expenses by January 1, 2023. You know, I told people at the time that, you know, there's risk in making these investments, right, we're shareholders of this, we've lost capital. Some companies require tremendous capex investment to maintain their existing business. Altimeter Capital owns approximately 0.11% of Meta. Dont miss out on ET Prime stories! And notably, this decline in share price mirrors the lost confidence in the company, not just the bad mood of the market. Altimeter Capital Management, LP The comp against IDFA was very difficult in Q1 and will again be difficult in q2. . 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. "An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards," Gerstner wrote. In Q1 of 2021, everybody was sitting on their couch. 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. I've got some people including a guy coming up in a little while Mike Wilson who suggested at this point bonds may be a better deal than stocks. 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. Contact. The changes for the Quest 2 begin Sunday, March 5. It lost $5.8 billion in the first six months of the year. Social networking is the use of internet-based social media platforms to make connections and share various media with friends, family, colleagues, or customers. We think both of those are solvable. 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. We have $130 oil and $6 gas at the pump. We also believe Metas investment in AI will lead to exciting and important new products that can be cross-sold to billions of customers. 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. Open letter: Altimeter Capital founder and CEO Brad Gerstner encourages Meta to cut capex by $5B+, cut headcount by 20%+, and limit metaverse R&D to $5B/year As you know, we are long-term shareholders. Got a confidential news tip? Think about this, Scott. We've never seen on the order of magnitude of the Marshall Plan at the beginning of COVID. Limit investment in metaverse / Reality Labs to no more than $5B per year. Altimeter manages a long / short public equity fund and private growth equity funds. We didn't see the concerns emerging about hyperinflation about 10 to 12 rate hikes, and we certainly didn't see this tragic more unfolding on the doorstep of Europe. We hereby appoint ISDA as our agent for the limited purposes of the Protocol Agreement and accordingly we waive, and hereby release ISDA from, any rights, claims, actions or causes of action whatsoever (whether in contract, tort or otherwise) arising out of or in any way relating to this Adherence Letter or our adherence to the Protocol Agreement or any actions contemplated as being required by ISDA. Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. The industry leader for online information for tax, accounting and finance professionals. for a description of how we use cookies. And as a result, you know, last year we held up better than most because we own high-quality stocks, and we were short lower quality stocks. To read full story, subscribe to ET Prime, Billed annually at Brad Gerstner's Phone Number and Email Last Update. We know Meta has more reach, more relevance, and more incredible opportunities for growth than almost any platform on the planet.