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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

#41

Post by zeckalpha »

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…

If the decrease in value to Pepsi is less than the gains in Coca Cola, then yes, by the logic of this suit. However, I'd Coca Cola gains more than the loss to Pepsi, then no need to sue.

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

#42

Post by yarg »

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…

It also sounds like an intractable optimisation problem.

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

#44

Post by cassonmars »

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:…

It’s not even clear yet whether this has been a bad investment decision. Zuckerberg is playing a long game here, and the market is notoriously short-term, immediate-profits-driven. Long term investors may actually be quite pleased if this strategy turns out to be generation-defining. Obviously no person can say this with certainty, but they can see his track record — he’s gone against the grain on many occasions, at the peril of short term holders, only to dramatically increase the overall profits of the company exponentially.

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

#45

Post by chowells »

donmcronald wrote: post #38
Kranar wrote: post #20

Earlier quoted context omitted.

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 port…

That’s insane! Imagine if a small company invented a cure for cancer. Would they be liable for the losses of all the pharmaceutical companies? It would be the end of innovation.

No, because they would present massive gains to every industry that loses employees to cancer. That's all of them, by the way. There would be no net loss, and innovation would continue to be rewarded.

What would no longer be rewarded is parasitism.

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

#46

Post by dpatterbee »

syrrim wrote: post #26
Kranar wrote: post #20

Earlier quoted context omitted.

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 port…

It's an interesting perspective. There's probably a sense in which overall improving a diversified portfolio maps to improving society or the economy as a whole, rather than harming society to make a dollar. So whereas the lawsuit likely has no grounds, it might actually be a good thing if this was the way things worked.

I think equating (or even correlating) the market value of some stocks with "improving society" is a pretty big reach.

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

#47

Post by ClumsyPilot »

chowells wrote: post #45
donmcronald wrote: post #38

Earlier quoted context omitted.

That’s insane! Imagine if a small company invented a cure for cancer. Would they be liable for the losses of all the pharmaceutical companies? It would be the end of innovation.

No, because they would present massive gains to every industry that loses employees to cancer. That's all of them, by the way. There would be no net loss, and innovation would continue to be rewarded. What would no longer be rewarded is parasitism.

If companies were that concerned about loosing employees, companies like deliveroo and amazon would not be destroying their health. Coal minin conoanies would not need health and safety regulation - they used to literally kill their workers

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

#49

Post by anigbrowl »

cassonmars wrote: post #44
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:…

It’s not even clear yet whether this has been a bad investment decision. Zuckerberg is playing a long game here, and the market is notoriously short-term, immediate-profits-driven. Long term investors may actually be quite pleased if this strategy turns out to be generation-defining. Obviously no person can say this with certainty, but they can see his track record — he’s gone against the grain on many occasions, at…

> Zuckerberg is playing a long game here

He may have legs, but I'm not the same can be said of his strategy. While I give FB credit for things like Pytorch and other innovations, I can't remember the last time the firm produced anything interesting on the product side. I only maintain an FB account because of a few friends and family members who use it as their preferred platform.

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

#50

Post by jameshart »

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:…

“We never expected the leopards to eat our faces!” say investors in Face-Eating-Leopards inc.

Basically this is investors saying they are concerned that they are having to bear some of the externalized costs of Facebook’s business.

Traditionally, businesses have been more careful to target those externalities at folks in the third world, or at the very least in poor parts of the state, and avoided impacting the investing classes.

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