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Lawsuit against Meta invokes modern portfolio theory to protect shareholders

corpgov.law.harvard.edu

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Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#11

Post by eezurr »

Interesting and disturbing. They are making an argument that Facebook/Meta is harmful to the global economy because it cant do [impossible task] of moderating its 3.5 billion users to stifle [unwanted behavior]. And because of that, their decisions are negatively impacting the modern investors distributed portfolios.

Because Mark Z. is not diversified (wealth is in Meta) and has total control over the company, his decisions create a conflict of interest to the modern investor.

Yet the article doesnt mention how his decisions directly impacted the economy. Maybe the lawsuit does, but Im not going to read that...

>the fiduciary implication of the fact that modern investors are generally diversified, so that their interests extend beyond (and may be in opposition to) the maximization of the value of future cash flows to be received from owning a company’s shares.

So it's fighting monopolistic behavior?

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#12

Post by TheGeminon »

cherioo wrote: post #3
cratermoon wrote: post #2

In simple terms, investors are suing because even though they might have made a boatload of cash from their investments in Meta, they ended up with a net loss overall because what Meta did to pump up the stock value ended up destroying the value of a lot of other things the investors had in their portfolios.

Wow, this seems bananas. The loss in value isn’t even other investment, but rather “mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation”

I think they are intentionally being vague to encompass as much as possible in their theoretical “diversified portfolio”.

I think their goal is to prove that Meta’s negative impact was so broad that most investors had some sort of negative impact outside of their Meta holdings.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#13

Post by flanflan »

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do.

I see posters here brushing off talk about mental health and political impacts from decisions corporate directors make. Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued?

It's a meme, but we live in a society. Companies don't exist in isolation, neither do profits.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#14

Post by anigbrowl »

Anyone who invested in Facebook directly (rather than via a managed or exchange-traded fund of some sort) did so with the expected awareness that all the voting stock was controlled by Zuckerberg personally. Effectively, FB is a corporate dictatorship and it's hard to have sympathy for people who put money into it during the good times and are now surprised to discover that they made a bad investment decision.

https://www.morningstar.com/articles/1061237/how-facebook-si...

Suing Zuckerberg on the basis that FB has made the world a worse place is one thing, suing him on the basis that a corporate dictatorship has disrupted their portfolio is a joke. They'd be better off suing the SEC or FTC for failure to regulate effectively.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#15

Post by jbombadil »

hn_throwaway_99 wrote: post #7

This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. The consequences of that line of thinking are scary. I'm sure the vast majority of shareholders of most US companies own ICE cars. If a company decides to put a lot of effort into, for example, cheaper batte…

> This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own.

This is my thinking as well. If I own stock of Coca Cola and Pepsi. Coca Cola comes up with a great product that eats a huge amount of market from Pepsi. According to this I sue Coca Cola for my losses on the Pepsi stock?

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#16

Post by qclibre22 »

anigbrowl wrote: post #14

Anyone who invested in Facebook directly (rather than via a managed or exchange-traded fund of some sort) did so with the expected awareness that all the voting stock was controlled by Zuckerberg personally. Effectively, FB is a corporate dictatorship and it's hard to have sympathy for people who put money into it during the good times and are now surprised to discover that they made a bad investment decision. https:…

Might be a good time to go back to one share one vote corporate structure.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#17

Post by vineyardmike »

supernova87a wrote: post #10

Hopefully the case gets summarily tossed for lack of standing. The idea that one company's decisions would have such tangible and personally-harmful (to "my portfolio") effects due to "negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation" would open up every company to diffuse claims of responsibility.

As another person commented, maybe they should be open to that responsibility?

> The idea that one company's decisions would have such tangible and personally-harmful effects due to "negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation" would open up every company to diffuse claims of responsibility.

Kinda scary we’re tacitly saying that IFF a company is responsible for this then it’s ok? If a person was responsible for all (any) of that, most of society would hold them in pretty low regard.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#18

Post by IncRnd »

flanflan wrote: post #13

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts…

> Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued?

Say I overhear my neighbors talking with each other. Despite my not knowing them, if based on listening to their conversation I decid to go kill some people at my place of employment - that is on me. My neighbors do not bear any responsibility. At some point there is the concept of personal responsibility. Honestly, this should be obvious.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#19

Post by cratermoon »

WaitWaitWha wrote: post #9
cratermoon wrote: post #2

In simple terms, investors are suing because even though they might have made a boatload of cash from their investments in Meta, they ended up with a net loss overall because what Meta did to pump up the stock value ended up destroying the value of a lot of other things the investors had in their portfolios.

That is not what I gathered, but I invest in dirt so who knows. What I gathered, is that the facebook decisions impacted non-facebook stocks, facebook not only should have known but also are responsible as fiduciary to the stock holders. In short, besides you, I bought your competitor, you should have known I bought them, your actions now crushed your competitor, I lost a boatload on them, you are responsible. > The…

> the facebook decisions impacted non-facebook stocks, facebook not only should have known but also are responsible as fiduciary to the stock holders.

That's sort of the same as what I said. The claim is that Meta did things to make money that caused investors to lose money in other stocks & investments, and that Meta is responsible for those losses.

Re: Lawsuit against Meta invokes modern portfolio theory to protect shareholders

#20

Post by Kranar »

jbombadil wrote: post #15
hn_throwaway_99 wrote: post #7

This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. The consequences of that line of thinking are scary. I'm sure the vast majority of shareholders of most US companies own ICE cars. If a company decides to put a lot of effort into, for example, cheaper batte…

> This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. This is my thinking as well. If I own stock of Coca Cola and Pepsi. Coca Cola comes up with a great product that eats a huge amount of market from Pepsi. According to this I sue Coca Cola for my losses on…

I don't think this lawsuit has much merit, but the lawsuit is arguing against damages to an overall portfolio. If a diversified portfolio consisting of Coca Cola and Pepsi was on the whole damaged due to the actions of Coca Cola against Pepsi, then the plaintiffs argue that Coca Cola would be liable for some part of that damage.

If, however, Coca Cola's actions harmed Pepsi specifically but benefited the overall portfolio, then no damages would be pursued.

So Coca Cola is welcome to take market share from Pepsi so long as doing so is a net benefit to a diversified portfolio, as opposed to doing so in a way that harms a diversified portfolio.

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