Altimeter Capital Management LLC. WAPNER: I want to take a look at the stock in "Overtime" here because I think you're moving in I'm looking at what looks to be a higher move as we're having this conversation and that brings me frankly, now to Facebook. Sign up for free newsletters and get more CNBC delivered to your inbox. It just launched in 150 countries, has over a billion views. As such, we would encourage the company to move aggressively and cut at least 20% of employee-related expenses by January 1, 2023. 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. Search ISDA ISDA fosters safe and efficient derivatives markets to facilitate effective risk . Altimeter said annual free cash flow can be doubled to $40 billion if it cut headcount by at least 20%, trimmed capital expenditure by at least $5 billion to $25 billion a year and capped annual investment in the metaverse to $5 billion instead of the current $10 billion. ET on GuruFocus.com Builders Union LLP Buys AppLovin Corp, Match. This is a business it's trading at 12 times free cash flow, X the meta investment and 18 times including. With that said, we have a shortage of talent in Silicon Valley. I have deep respect and admiration for founders that continue to grind, inspire, and invent long after the financial motivation is gone. WAPNER: I know I know you're not happy about it. Altimeter Capital Management, LP ("Altimeter") is an SEC-registered investment adviser. It's interesting that now today you say we're in the neighborhood of a tradable bottom. Paul A. Reeder 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. 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. 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. 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. Right? Moreover, I am a strong supporter of founder-led companies especially when they have your successful track record of seeing the future. Popular Searches. 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 Meta needs to get its mojo back. What is the rate of increase? See here for a complete list of exchanges and delays. 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. And then take that part of the world. 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. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. And now we've shot right through the five-year average. There are a lot of companies with speculative business models, right, that are should have never been valued where they were valued and if you don't have absolute conviction, right, they can grow their product, grow their top line and grow their earnings to match where those earlier prices were, then you need to rotate those dollars out of those companies and into companies where you have that level of conviction. If the company were investing $12B per year into this project, then that confusion might not even be a problem. 233 South Wacker Drive I have been told that Amazon spent far less in total to build AWS. But the fact of the matter is the entire market has evaporated around these types of stocks. Read More . United Urgently Needs a Course Correction: United's stockholders, customers, and employees deserve better Board governance, better Board leadership, and better Board performance. 2023 CNBC LLC. Warren Buffett's: Berkshire Hathaway. Meta said the cost of the Quest 2 will drop $70 to $429.99, while the price of the higher-end Quest Pro will be slashed to $999.99 from $1,499.99. committed hundreds of millions of dollars to Sequoia Capital, Altimeter Capital Management and Multicoin . The changes for the Quest 2 begin Sunday, March 5. They were buying goods, soccer balls on DICK's Sporting Goods and candles on Williams Sonoma. No matter how a company came public in 2021, let alone December of 2021, right, they've been obliterated. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. c/o Chairman Henry L. Meyer III All Rights Reserved. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Over the last three years, Meta has also dramatically increased its capital expenses. The offers that appear in this table are from partnerships from which Investopedia receives compensation. We do not take job reductions lightly. Is it done? 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. 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. Conforti plans to join a new firm as a co-founder with. Crowdfunding is the use of small amounts of capital from a large number of people to raise money or fund a business. We simply wanted to further engage and continue sharing our thoughts as an interested shareholder. Our best guess is that maintenance capex for Meta is less than $10B annually. 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. Kultura Capital Management is being structured as a hybrid fund that will focus on late-stage tech startups as well as public companies, the person said. 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. This is a region of 700 million plus people. The comp against IDFA was very difficult in Q1 and will again be difficult in q2. Sign Up. 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 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. 15 . "Meta Reports Fourth Quarter and Full Year 2022 Results," Page 10. Mark Zuckerberg is a self-made billionaire and the CEO of Meta (formerly Facebook), which he co-founded in his dorm room in 2004. I mean, we're talking about billions of dollars in revenue but you left that out. When you visit the site, Dotdash Meredith and its partners may store or retrieve information on your browser, mostly in the form of cookies. All Rights Reserved. Congrats on the new show. Of course, a company that connects nearly three billion users on phone and text must be investing in the next generation of communication. All rights reserved. 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. Reels, which is a massive product is going to increase its monetization between now and the end of the year. We agree to pay a one-time fee of $500 to ISDA at or before the submission of this Adherence Letter. Founder & Chief Executive Officer at Altimeter Capital . Where's your exposure today? Altimeter Capital Management is an investment firm with offices in Menlo Park, CA, and Boston, MA. But I do believe that this company like the others that we talked about is going to be worth more in the future supported by real free cash flow. Altimeter Capital Management is an investment firm that operates within the technology sector. A securities lawyer, Brad Gerstner graduated from HBS in 2000 and joined General Catalyst. Privacy Policy, ISDA uses cookies to enhance your experience on our website. Brad Gerstner, Founder and CEO of Altimeter Capital; former board member of Orbitz Worldwide; He said the money the company is currently spending to develop VR could add up for a decade before it comes to fruition. If the deal goes through, it. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. 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. "Time to Get Fit an Open Letter from Altimeter to Mark Zuckerberg (and the Meta Board of Directors).". Brad Gerstner Enjoy a 7-Day Free Trial Thru Feb 17, 2023! Got a confidential news tip? If you really think about what the metaverse is in the first instance, it's a better version of what you and I are doing right here. 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. 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. The conventional wisdom press and investor is that the core business hit a wall last fall. 2499 1749, Monthly Bill Ackman's: Pershing Square Capital Management. We have not made this difficult decision lightly, but after thorough, serious, and objective analysis, we feel compelled to act. The bet . 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 . Drew Angerer | Getty Images News | Getty Images, Meta needs to focus on its core business, not the Metaverse, says Sand Hill's Brenda Vingiello. Brad Gerstner's Phone Number and Email Last Update. We have no stimulus checks. I remember people asking that question about Amazon. At the same time that Meta ramped up spend, you lost the confidence of investors. To read full story, subscribe to ET Prime, Billed annually at PAR Capital Management, Inc. Do Not Sell My Personal Data/Privacy Policy. And I've let the company know that, right? We have $130 oil and $6 gas at the pump. 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. Every company I talked to is tightening its belts. 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. It was being purchased on the Shopify platform and people were using PayPal to check out. The letter is the latest sign that Meta investors are starting to express reservations about the company's recent performance. It's 3 trillion, right? As you know, Altimeter Capital Management and PAR Capital Management are long-term United Continental Holdings, Inc. ("United") stockholders that together own approximately 7.1% of United's outstanding common stock. Remember last year they gave a guide at the beginning of the year they're going to grow at 80%. Copyright 2023 Bennett, Coleman & Co. Ltd. All rights reserved. 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%. ISDA fosters safe and efficient derivatives markets to facilitate Your P/E ratio has fallen from 23x to 12x and now trades at less than half the average P/E of your peers. They're building their own ad platform, right, that can deal with this. The facts are startling. It's going to do 20 billion in GMV. 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. This compensation may impact how and where listings appear. Benzinga does not provide investment advice. 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. We've destroyed over $15 trillion of stock market wealth. On Oct. 11, Meta announced a new high-end VR headset, the Quest Pro. Ultimately, we and the Board necessarily must share the same objective: maximizing long-term value creation for United's stockholders, customers, and employees. Louis Bacon's: Moore Capital Management. Form of Letter Agreement between the Registrant, the Sponsor and each director and executive officer of the Registrant. They just announced that they're going to be profit, full company profitable by 2023. Altimeter's nominees are: Regrettably, our efforts have led to our complete loss of confidence in the current Board, and to our firm determination that meaningful, stockholder-directed Board change is urgently required to serve the long-term best interests of United's stockholders, customers, and employees. Perhaps it was the re-naming of the company to Meta that caused the world to conclude that you were spending 100% of your time on Reality Labs instead of AI or the core business. 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. 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. So take Snowflake as an example. Meta changed its company name from Facebook. Over the last three years, Meta has also dramatically increased its capital expenses. Protocol: My bet is we're gonna have less this year. 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. As a result, the team hastily pivoted the company toward the metaverse including a surprise re-naming of the company to Meta. As such, we would encourage the company to move aggressively and cut at least 20% of employee-related expenses by January 1, 2023. Getting Fit Headcount Reduction / Expense Control. They're fearful about the war. But as you know, in the first three months of this year, all the high-quality stocks are being destroyed as well. To experience the full functionality of the ISDA website, it is necessary to enable Javascript in your That stuff was being advertised on Instagram. It's been a big drawdown this year. So listen, I'm not happy about it. They're fearful about what's going to happen with rates. The silver lining is that unlike many companies, this popular narrative obscures the truth. ISDA 2021 SBS Top-Up Protocol, Adhering Organization: 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. Brad Gerstner is the Founder & Chief Executive Officer at Altimeter Capital based in Boston, Massachusetts. If they do it, I think the stock can be up over 50% between now and the end of the year. 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. Indias general insurers are looking to set up a larger marine insurance pool to cover the risks of transporting crude oil, edible oil, project machinery and fertiliser from the war-torn Russia-Ukraine region. Two years from now, people are going to be looking back and say, why the hell didn't you buy Snowflake at 160 bucks a share? If you look at, if you look at, you know, what we expect to occur over the rest of the year, this stock will compound as it continues to beat earnings, as it continues to expand its use cases, even without multiples expanding, right, as investors begin to look at those higher numbers in '23 and '24. 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. Board of Directors If you look at the company, it's now trading at $5 billion enterprise value. The reductions for the Quest Pro start March 5 in the U.S. and Canada, and on March 15 in other countries where it is supported. Brad Gerstner's Altimeter Capital Management has between $300 million and $400 million in assets under management, and invests almost exclusively in the services sector. b***@altimeter.com. Meta Platforms, which is set to report third-quarter results on Wednesday after markets close, declined to comment. We've never seen on the order of magnitude of the Marshall Plan at the beginning of COVID. 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. You know how to time markets. You do, you do great work, excited for the new show and let's stay after it. It has 24 billion in free cash they're going to generate this year. 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). 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. 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. You know, I said on Twitter a few weeks ago, I don't think the Fed's behind the curve on rates. But it's good to be here and and you know, while I think we we did see the normalization and multiples as a likely outcome toward the end of last year. Unlock your 30 days free access to ETPrime now. In preparation for its first-ever mass tournament, Chronos will feature a fantasy-theme RPG with the potential to earn prizes and a chance to win based on the classes of playable . Can you tell me where that stands now and how you view stocks like that that have gotten absolutely obliterated? Menlo Park, CA 94025 (650) 549-9145 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies: . articles a month for anyone to read, even non-subscribers! 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. And so that will be rolled out in Q2 and Q3. It takes effect in 2023. Rates are going up and we have a war. The Singaporean rideshare giant Grab is set to merge with the SPAC Altimeter Growth 1, according to a report from The Financial Times. And so we're getting hurt like everybody else. . Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Altimeter was founded in 2008 and is headquartered out of Boston, Massachusetts. We're down on the year. I mean, two years ago we were we were having this conversation. 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This lack of focus and fitness is obscured when growth is easy but deadly when growth slows and technology changes. It's our largest position we're not selling but we acknowledge that it's been rough for our investors, rough for us. As you know, we have attempted to work collaboratively with the current Board to meaningfully improve governance, Board composition, and oversight. Moreover, Meta has industry leading capabilities in key future technologies like artificial intelligence and immersive 3d that will help drive new products and future growth. We had given most of that up by middle of December. Brad Gerstner founded the. Please refer to the section on cookies in our Website Privacy Policy Consumer confidence is plummeting. 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. Altimeter Capital Management LP lifted its position in shares of SEA by 128.0% during the first quarter. 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. See here for a complete list of exchanges and delays. 2-Year 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. See the Top Performing Hedge-Funds > Brad Gerstner . It will get there three years from now because it's free cash flow margin will continue to expand and if you just get it, give it the multiples that are currently in the market, right, that have already drawn down on free cash flow, you get to that 3X that I quoted. The industry leader for online information for tax, accounting and finance professionals. 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. GERSTNER: Scott, I love that you asked the question. 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. It makes no sense to me, but that is the risk that you run. 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. Altimeter Capital Management is a technology focused investment firm based in Menlo Park, CA and Boston, MA. Perhaps it was the re-naming of the company to Meta that caused the world to conclude that you were spending 100% of your time on Reality Labs instead of AI or the core business. ", Medium.com. In the letter, Gerstner said Altimeter Capital doesn't have demands and simply wants to engage with Meta management.