Thanks for reading The Briefing, our nightly column where we break down the day’s news. If you like what you see, I encourage you to subscribe to our reporting here.
Greetings!
Talk about bad timing. Meta Platforms made a big splash on Tuesday night by disclosing new stock grants for senior executives that fully pay out only if the company’s market capitalization rises above $9.4 trillion by 2031, from $1.5 trillion now. Hours later, on Wednesday, we scooped the news that Meta was laying off hundreds of people. And hours after that, a jury in Los Angeles found Meta and Google’s YouTube liable for negligence in a lawsuit about the addictive qualities of social media.
It’s not crazy to think the court decision might dampen Meta’s future stock value. As my colleague Erin Woo wrote on the eve of the trial in late January, the case was the first of thousands of claims brought by families who say the companies built products designed to be addictive and harmful to young people’s mental health. This verdict was expected to set a precedent for resolution of all the cases in what could be a global settlement.
For now, investors don’t seem too worried. Shares of both companies slipped a little in the hour after the verdict. And the damages awarded weren't as high as some people had expected. Still, investors may be missing the bigger picture. The legal precedent set by this case could open social media companies to new areas of liability, Erin noted in January. And given that some AI companies are now facing litigation over harms AI chatbots have done to individuals, the precedent could extend to the new technology.
And let’s not forget that Meta’s future value depends as much as ever on the ability of its social media apps to keep people hooked. In fact, if you listen to commentary from top executives, their hope is to use AI to ensure social media feeds are even more tailored for individuals than they are now. So regardless of how much Meta, and YouTube, have to pay for past actions, this case could impinge on what the company does in the future.
Meta’s Stock Grants
Even before the court decision on Wednesday, Meta’s big stock option grants disclosed in securities filings on Tuesday night felt a bit like compensation theater. For any of the options to be worth anything, Meta’s stock would have to nearly double by 2031 to above the minimum exercise price of $1,116 a share. That’s possible but far from guaranteed.
For the full grant to vest, the stock has to get to $3,727. If Meta’s stock price manages such an incredible rally, the executives—including Chief Financial Officer Susan Li, Chief Technology Officer Andrew Bosworth, Chief Product Officer Chris Cox and Chief Operating Officer Javier Oliván—would easily make close to $800 million each from the options. But it’s also possible the options expire worthless.
So what’s the point? Mark Zuckerberg seems to be trying to match Elon Musk in projecting confidence about his company’s future. Remember, Musk likes to periodically brag about Tesla’s future value (he recently posted that “it’s not impossible” for Tesla to one day be worth $100 trillion). And the electric vehicle maker last fall approved a grant of restricted stock units to Musk worth up to $1 trillion if Tesla met a number of goals in the next decade, including its market capitalization rising to $8.5 trillion. (Tesla was worth about $1 trillion at the time and is now at $1.4 trillion, very close to Meta). Can it be a coincidence that Meta’s goals edge out Tesla’s by nearly a trillion dollars?
Guessing which company has more of a chance of meeting its goals would be hazardous, given the hurdles before both. Tesla is trying to transform itself into a robot and robotaxi company—it’s anyone’s guess whether Musk will succeed. As for Meta, Zuckerberg is spending massively on AI without any obvious way of generating a return, beyond juicing Meta’s already giant ad business. Judging from the company’s anemic stock price performance over the past year, investors are not optimistic.
Even if the options end up worthless, there’ll be no need to cry for the executives. Not only do they earn salaries of close to a million dollars each, they get cash bonuses of about the same. And each year they get new grants of RSUs, typically worth tens of millions of dollars. The new stock option grants were in addition to a new grant of RSUs. In other words, the options are like icing on the cake. Very rich icing.
In Other News
• Chinese authorities barred Manus’ co-founders from leaving the country while regulators review Meta’s $2 billion acquisition of the AI agent startup, The Financial Times reported.
• Shares of U.S. space companies rose Wednesday after The Information reported Tuesday night that SpaceX is aiming to file its IPO prospectus with regulators as soon as this week. The report said advisers involved in the preparation predict the company could try to raise more than $75 billion in the IPO, higher than a previously reported estimate of $50 billion.
• Amazon said customers can return items they bought on the commerce giant’s site at over 1,500 FedEx Office locations nationwide. Shoppers will be able to drop off unboxed items and won’t pay fees on the returns.
Today on The Information’s TITV
Check out today’s episode of TITV in which our AI reporter takes us inside her reporting on OpenAI’s Sora pivot and its new upcoming model.
Recommended Newsletter
Start your day with Applied AI, the newsletter from The Information that uncovers how leading businesses are leveraging AI to automate tasks across the board. Subscribe now for free to get it delivered straight to your inbox twice a week.
Join The Information's live Q&A on Talent Tracker: Venture Capital’s Rising Leaders on March 26th! Our expert team, including Laura Mandaro and Julia Hornstein, will provide a behind-the-scenes look at the next generation of top GPs and operators.
Join The Information at the New York Stock Exchange on Monday, April 27, to hear from top executives and investors on how the rapid buildout of AI is reshaping tech, finance, and capital markets
Save the date for The Information’s annual AI Agenda Live in San Francisco, where top AI researchers, founders, investors and executives come together for a day of conversations about the breakthroughs and applications shaping the future of AI.
