#SocialStocks: Supreme Court Strikes Down Texas Social Media Law For Now

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SEC looks into Musk’s Twitter stake disclosure, Meta receives patent infringement complaint and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.


Sheryl Sandberg, Chief Operating Officer at Meta, just announced in a Facebook post: “Today, I am sharing the news that after 14 years, I will be leaving Meta. When I first met Mark, I was not really looking for a new job – and I could have never predicted how meeting him would change my life… Sitting by Mark’s side for these 14 years has been the honor and privilege of a lifetime. Mark is a true visionary and a caring leader… Over the next few months, Mark and I will transition my direct reports and I will leave the company this fall. I still believe as strongly as ever in our mission, and I am honored that I will continue to serve on Meta’s board of directors.”


On Tuesday, the U.S. Supreme Court suspended a Texas law that restricts Twitter (TWTR) and Meta Platforms’ (FB) Facebook from removing posts based on a user’s political view “while a constitutional challenge goes forward in a lower court, granting a request from tech groups that represent the platforms,” reported Bloomberg’s Greg Stohr. “It will be impossible for these websites to comply with HB20’s key provisions without irreversibly transforming their worldwide online platforms to disseminate harmful, offensive, extremist, and disturbing content,” argued the tech groups, NetChoice and Computer and Communication Industry Association, according to the Bloomberg story. The tech groups, which also represent Google (GOOG), argued the measure would unconstitutionally bar platforms from removing neo-Nazi and Ku Klux Klan screeds or Russian propaganda about its invasion of Ukraine.


Meta Platforms announced that its Class A common stock will begin trading on Nasdaq under the ticker symbol (META) prior to market open on June 9. This will replace the company’s current ticker symbol (FB), which has been used since its initial public offering in 2012. The new ticker symbol aligns with the company’s rebranding from Facebook to Meta, announced on October 28.


With about two-thirds of the stocks in the S&P 500 down more than 20% from their all-time highs and the index itself down 15%, many stocks are on sale, Al Root wrote in this week’s edition of Barron’s. But the stock market isn’t like a clothing store, where bargains are happily scooped up, even if not all of them will look as good when you get home. Instead, when stocks are falling, many investors find it difficult to pull the trigger, fearful they’ll pick a dud that only adds to the pain that’s already afflicting their portfolios.


In a Form 8-K filing, Twitter said, “On May 25, 2022, Twitter held its annual meeting of stockholders. Egon Durban did not receive a majority of the votes cast at the Meeting for his election to the Company’s Board of Directors. In accordance with the Company’s Corporate Governance Guidelines, in advance of his nomination, Mr. Durban tendered his resignation as a member of the Board, with the effectiveness of such resignation being conditioned upon Mr. Durban not receiving a majority of the votes cast for his election at the Meeting and the Board’s acceptance of such resignation. The Board believes that the reason Mr. Durban failed to receive the support of a majority of the votes cast for his reelection to the Board at the Meeting was due to proxy advisory firm voting guidelines, as well as voting policies of certain institutional investors regarding board service limitations. As disclosed in the Company’s proxy statement, Mr. Durban serves on the boards of directors of six other publicly traded companies. Following deliberations, on May 26, 2022, the Board determined not to accept the Tendered Resignation in connection with Mr. Durban’s agreement to reduce his board service commitment to no more than five public company boards by May 25, 2023. In making its determination, the Board considered the recommendation of the Company’s Nominating and Corporate Governance Committee to not accept the Tendered Resignation. The Nominating Committee, in making its recommendation to the Board, considered factors they deemed relevant, including Mr. Durban’s appointment to the Board pursuant to a March 9, 2020 agreement between the Company and funds affiliated with Silver Lake, whereby Silver Lake has the right to designate one nominee on the Company’s slate of nominees for election to the Board. The Nominating Committee further considered Mr. Durban’s other commitments in light of his overall contributions to the Board and was confident that Mr. Durban has sufficient capacity to fulfill his fiduciary duties to the Company’s stockholders. The Board considers Mr. Durban a highly effective member and believes that he brings to the Board an unparalleled operational knowledge of the industry, a unique perspective, and an invaluable skill set and experience with mergers and acquisitions. The Board noted that Mr. Durban has strengthened its ability to oversee the Company’s long-term value creation strategy and effectively govern its implementation. Further, Mr. Durban is consistently well-prepared, engaged and a meaningful contributor to Board meetings and discussions. While the Board does not believe that Mr. Durban’s other public company directorships will become an impediment if such engagements were to continue, Mr. Durban’s commitment to reduce his board service commitment to five public company boards by the Remediation Date appropriately addresses the concerns raised by stockholders with regard to such engagements. Accordingly, the Board has reached the determination that accepting Mr. Durban’s Tendered Resignation at this time is not in the best interests of the Company. Mr. Durban did not participate in the deliberations by the Nominating Committee or the Board regarding whether to accept the Tendered Resignation.”

The SEC is now going to take a look into Tesla (TSLA) CEO Elon Musk’s disclosure of his stake in Twitter (TWTR) in April, according to a letter sent to the parties last month, Reuters’ Nivedita Balu reports. 

In a regulatory filing last week, Elon Musk disclosed that he allowed the remainder of the margin loan commitments contemplated by a margin loan commitment letter to expire, at which time the margin loan commitment letter and the commitments thereunder terminated. “Concurrently with the foregoing, the Reporting Person committed to provide an additional $6.25 billion in equity financing to fund a portion of the Merger Consideration by amending and restating the Amended Equity Commitment Letter, dated as of May 4, 2022, to increase the aggregate principle amount of the equity commitment thereunder to $33.5 billion. The Reporting Person (on behalf of himself and Parent) is seeking and the Reporting Person (directly or indirectly through Parent) may receive additional financing commitments to fund portions of the total Merger Consideration, which commitments, subject to the terms of the Merger Agreement and the May 24 Equity Commitment Letter, may replace portions of the financing commitments previously reported by the Reporting Person in connection with the Merger Agreement and the Merger contemplated thereby, including portions of the Reporting Person’s May 24 Equity Commitment Letter described herein. In addition, the Reporting Person (on behalf of himself and Parent) is having, and will continue to have, discussions with certain existing holders of Common Stock (including Jack Dorsey) regarding the possibility of contributing such shares of Common Stock to Parent, at or immediately prior to the closing of the Merger, in order to retain an equity investment in Parent or Twitter following completion of the Merger in lieu of receiving Merger Consideration in the Merger,” the filing noted.


Immersion (IMMR) announced that it has filed a complaint against Meta Platforms in the United States District Court for the Western District of Texas. The complaint alleges that Meta’s augmented and virtual reality, or AR/VR, systems, including the Meta Quest 2, infringe six Immersion patents that cover various uses of haptic effects in connection with such AR/VR systems. Immersion is seeking to enjoin Meta from further infringement and to recover a reasonable royalty for such infringement. Francis Jose, CEO and general counsel of Immersion said, “While we are pleased to see that Meta recognizes the value of haptics and has adopted our haptic technology in its AR/VR systems as part of its multi-billion dollar effort to create the metaverse and generate revenue streams through the sales of hardware, games and other virtual assets, and advertisements, it is important for us to protect our business against infringement of our intellectual property to preserve the investments that we have made in our technology,” added Jose. “We must ensure that our intellectual property is recognized as a necessary feature in the emerging AR/VR/metaverse market, even when litigation becomes necessary.”


An investigation has found that Apple (AAPL), Meta, Amazon (AMZN), Google and Microsoft (MSFT) have launched a coordinated campaign in 31 states against data privacy legislation since 2021, The Markup’s Todd Feathers and Alfred Ng reported. Reportedly,  tech companies have provided draft language that led to the introduction of industry-friendly privacy bills, according to legislators The Markup interviewed.


Sprout Social (SPT) announced it is partnering with TikTok, as part of the TikTok Marketing Partner Program, to launch a first-of-its-kind integration that enables Sprout’s users to further grow their end-to-end video strategy with TikTok video scheduling, comment management and presentation-ready reports.


Meta Platforms CEO Mark Zuckerberg plans to bulk up investments in the company’s metaverse goals, wrote Sarah Frier for Bloomberg. Zuckerberg said the investments will result in losing “significant” investment capital over coming tree to five years, added the Bloomberg story.


Daiwa analyst Stephen Bersey double upgraded Zoom Video (ZM) to Outperform from Underperform. The recent pullback in the shares provides a good entry point, Bersey told investors in a research note. The analyst likes Zoom’s core business and says growth expectations now “seem more realistic.” Zoom’s “solid execution” in Q1 gives Bersey “positive incremental conviction” that the company’s core business demand is stabilizing.

Morgan Stanley analyst Brian Nowak lowered the firm’s price target on Meta Platforms and reiterated an Overweight rating on the shares. The analyst lowered estimates in the internet space to reflect a more conservative online advertising and e-commerce view amid “rising macro and micro uncertainty.” Morgan Stanley’s macro team’s multi-factor model also shows how the probability of a recession has increased to 35% from 5% at the start of the year, Nowak told investors in a research note. Given the “rising uncertainty” the analyst is taking a “more pragmatic approach” with his online ad and e-commerce estimates. The analyst also lowered the firm’s price target on Snap (SNAP) and Pinterest (PINS).

Credit Suisse analyst Stephen Ju lowered the firm’s price target on Snap and maintained an Outperform rating on the shares. The analyst notes that in an 8-K last week, Snap decreased its Q2 revenue/Adjusted EBITDA expectations without greater specifics aside from that they will be below the lower end of the previously-offered guidance. That Snap is preannouncing before the final month of Q2 without providing guard rails speaks to the open-ended nature of the downside risk to estimates and clouds visibility into the second half of 2022, Ju added..

Originally Posted June 1, 2022 – #SocialStocks: Supreme Court strikes down Texas social media law for now

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