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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

#61

Post by xvector »

anigbrowl wrote: post #49
cassonmars wrote: post #44

Earlier quoted context omitted.

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.

> I can't remember the last time the firm produced anything interesting on the product side

Quest 2, which has outsold Xbox Series X|S?

Bringing E2EE to the masses via WhatsApp?

Turning Instagram from some niche hipster pictures app to one of the biggest social platforms in the world?

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

#62

Post by ceejayoz »

xvector wrote: post #61
anigbrowl wrote: post #49

Earlier quoted context omitted.

> 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.

> I can't remember the last time the firm produced anything interesting on the product side Quest 2, which has outsold Xbox Series X|S? Bringing E2EE to the masses via WhatsApp? Turning Instagram from some niche hipster pictures app to one of the biggest social platforms in the world?

All three of those were acquisitions, which seems to sorta prove the point.

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

#63

Post by arjvik »

Kranar wrote: post #52
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.

I know I should interpret every comment in good faith, but it really is hard to understand how you can read my comment and make such a reply. It feels like you didn't actually take the time to understand what I said or even read the article before commenting. At any rate, if a company found a cure for cancer the stock market would absolutely skyrocket in a way almost never before seen. It's unbelievably hard to imagi…

What's to say the stock market would skyrocket? Especially if this cure is accessible to everyone and published freely online, the only direct effect is pharma companies stocks crashing because of a loss of oncology drug revenue. Who's to say what the rest of the stock market would to to react?

Even if it's a tossup, does that mean there's a 50% chance of the inventor of such a cure being liable for that crash?

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

#64

Post by celestialcheese »

pevey wrote: post #58
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…

I think what they are really trying to do here is come up with a legal theory that internalizes what economists call "externalities." One economic actor, in doing what is in its individual best interest, creates negative effects that may be much, much larger than the positive effects. We're not talking about Coke taking market share from Pepsi, which is analogy I saw elsewhere. A better analogy would be Company A tha…

You could make this argument that Apple has done this with their IDFA changes. Wipe out the public water source (data attribution) to benefit their internal apple ads (new DSP + Apple app and search ads). Overall portfolio effect of that IDFA change has been extremely negative for every company but Apple.

Should I as a shareholder of both Apple, Meta and Google be able to sue Apple for their changes?

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

#65

Post by mlazos »

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…

What you’re saying makes sense but I actually agree with the intent. They’re basically saying don’t destroy the government/society in the name of shareholder value. I feel like there should be a way to say this without saying “because our portfolio value!” But that’s the justification they want to try.

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

#66

Post by xivzgrev »

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:…

This.

Show me an investor complaining about Facebook’s corporate governance

And I’ll show you someone who doesn’t think investment decisions through

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

#67

Post by celestialcheese »

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…

Exactly. If he makes one announcement that he's directionally with Gerstner's shareholder letter [1] the stock will recover.

1 - https://medium.com/@alt.cap/time-to-get-fit-an-open-letter-f...

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

#68

Post by nanidin »

evrydayhustling wrote: post #53
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…

What is a diversified portfolio? Most indices are weighted by market cap, since everything else requires trading. So do we all the owe the most protection to the largest companies? The idea is deeply deeply broken, essentially, "everyone should care about everything according to some notion of a portfolio i think is normal".

The idea is counter to competition.

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

#69

Post by gfaster »

pevey wrote: post #58
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…

I think what they are really trying to do here is come up with a legal theory that internalizes what economists call "externalities." One economic actor, in doing what is in its individual best interest, creates negative effects that may be much, much larger than the positive effects. We're not talking about Coke taking market share from Pepsi, which is analogy I saw elsewhere. A better analogy would be Company A tha…

How nice would it be if corporations were held accountable for externalities? You'd almost immediately have all the big fossil fuel companies, automotive manufacturers, and likely banks sued into oblivion for defrauding shareholders.

IANAL, but I don't think this will hold up.

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

#70

Post by pevey »

civilized wrote: post #60
pevey wrote: post #58

Earlier quoted context omitted.

I think what they are really trying to do here is come up with a legal theory that internalizes what economists call "externalities." One economic actor, in doing what is in its individual best interest, creates negative effects that may be much, much larger than the positive effects. We're not talking about Coke taking market share from Pepsi, which is analogy I saw elsewhere. A better analogy would be Company A tha…

It's nice that the lawyer may have good intentions, but the legal theory is still crackpot. I don't cheer for silly legal theories to prevail just because of good intentions. The unintended consequences of silly legal theories prevailing are likely to be higher than any good achieved in this one instance.

I haven't given it a lot of thought, but I tend to agree with you. The sister comment to your comment (about AAPL and it's tracking/privacy changes and the effects on other companies) is a good example why. Some externalities may be realized as effects on other companies that may be part of a portfolio, but some may not be. For example, what about how users value their privacy?

It's a very interesting legal approach, but that doesn't make it right. Externalities are very tricky.

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