In recent months, many billionaires from top companies have leaned towards liquidating some of their shares, including Amazon (AMZN) founder Jeff Bezos, Nvidia (NVDA) CEO Jen Huang, Salesforce (CRM) CEO Marc Benioff, and Zuckerberg himself. Does this automatically mean a decline in stock value and a bad situation for shareholders? Not necessarily.
Is Meta Platforms currently a good buy? In the latest report submitted to the Securities and Exchange Commission (SEC), we see that since the beginning of November 2023, Meta Platforms (META) CEO Mark Zuckerberg has sold company shares worth over $228 million. This activity has attracted media attention - but should Zuckerberg’s recent liquidation of META shares be a cause for concern for long-term shareholders?
Generally speaking, when insiders buy shares, it suggests that they believe the stocks are undervalued and are optimistic about the company’s long-term prospects. Naturally, when a high-ranking member of the management team reduces their position, investors may become concerned – especially in light of META’s above-average stock return of 166% since the beginning of the year. So, does Zuckerberg think that the social media giant is overvalued at current prices?
Not necessarily. In fact, assessing sentiments regarding insider selling is much less straightforward, especially for individuals with very high net worth. For example, billionaires often make significant donations or sell shares at this time of year, either for philanthropic reasons or for simple accounting purposes.
It’s worth noting that this is Zuckerberg’s first share sale since 2021, following the brutal performance of tech stocks in 2022 - and the majority of the CEO’s stake in META is held through preferred voting shares, which are private. Therefore, it’s important to consider the bigger picture.
Currently, Meta is the largest social media company in the world, owning platforms like Facebook, Instagram, Facebook Messenger, and WhatsApp. These four apps attracted nearly 4 billion active users per month in the 3rd quarter of 2023. Meta also launched the Threads app in July to compete with Twitter, attracting 100 million users within the first five days.
The company’s activities in augmented and virtual reality, known as Reality Labs, are expected to be the main sales driver in the coming decade, especially if Zuckerberg succeeds in building the metaverse. Reality Labs lost $11.5 billion over the last three quarters, compared to losses of $9.5 billion in the previous period. However, Meta Platforms still recorded cash flows from operating activities of $51.7 billion in the first nine months of 2023 and ended the third quarter with $61 billion in cash.