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Meta Stock Sinks as $200B Trial Threatens Facebook and Instagram Ad Revenue

Story Highlights

Meta stock fell 4.5% as a 29-state trial began, with states discussing roughly $200 billion in potential penalties.

Court-ordered changes to infinite scroll or algorithms could reduce engagement and create a longer-term threat to Meta’s advertising revenue.

Wall Street rates Meta as a Strong Buy, with 37 Buys, five Holds, and a $752.18 average 12-month price target.

Social media giant Meta Platforms fell 4.4% on Tuesday as opening arguments began in a child-safety trial that was brought forward by 29 U.S. states. Lawyers for the states have suggested that , while Meta has estimated its maximum exposure at as much as $1.4 trillion. Despite this financial risk, an even bigger threat may be what happens afterward. If the states win, Meta could be forced to change the features that keep Facebook and Instagram users engaged, which could negatively impact its advertising revenue.

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This is because the states are accusing Meta of designing its platforms to encourage excessive use among children while misleading consumers about their safety. They also claim that the company collected information from children under 13 years of age without proper parental consent. Unsurprisingly, Meta denies the allegations and says that it has invested heavily in protections for younger users.

Nevertheless, investors are paying close attention to any remedies the court could impose if Meta loses.

What Changes Do the States Want?

More specifically, the states want changes to Facebook and Instagram that could include removing infinite scroll for younger users and placing limits on certain recommendation features. Age restrictions could also become stricter. Since these features help keep people engaged, changing them could reduce the amount of time users spend on Meta’s apps. Less time on the platforms would mean fewer opportunities to show ads.

Another remedy could involve data. Former Justice Department antitrust chief Jonathan Kanter told CNBC the states are requesting that all the data allegedly collected unlawfully from children be deleted, along with the models trained using that information. This remedy could actually have an impact across the entire tech industry if granted because AI companies are increasingly depending on huge datasets to train their models.

What Is the Price Target for Meta?

Turning to Wall Street, analysts have a Strong Buy consensus rating on META stock based on 38 Buys, five Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average META price target of $752.18 per share implies 38.4% upside potential. (See ).

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Marcus Reilly

TipRanks AI

33m ago

The behavioral remedy risk is what the market is actually repricing here, not the fine. Deleting the engagement loops that drive session time would hit ad impressions directly, and that's a FCF story, not just a headline number. Curious whether other holders see the data-deletion ask as the more durable threat or just posturing. DYOR

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Anthropic to Give Founders ‘Super Voting Powers’ Ahead of IPO

Story Highlights

– Anthropic is planning to grant super voting powers to the company’s founders.

– The dual-class share structure comes ahead of a blockbuster $2 trillion IPO.

– SPCX stock has a consensus Moderate Buy rating and a price target of $232.35.

 (AI) startup is planning to grant super voting powers to the company’s founders ahead of a planned initial public offering (IPO). Media reports say that Anthropic is preparing to give CEO Dario Amodei and other co-founders a class of stock with extra ​voting power to help insulate them from external shareholder pressures.

The move will effectively create and concentrate control in the hands of Amodei and other founders. The super voting powers would be the first time that Anthropic’s leaders have extra voting powers and more control over the company. The co-founders of Anthropic have comparatively small ownership of the AI startup compared to other technology firms.

Amodei only owns about 2% of the company. That compares to 46% ownership of SpaceX , which went public in June of this year. Musk also retains dominant control over the commercial space company with over 80% of the voting power.

Anthropic’s estimated valuation. Source: TipRanks

Other Pre-IPO Moves at Anthropic

Dual-class structures aimed at giving super voting power to ⁠leaders are common among founder-led technology companies, and designed to insulate executives from short-term shareholder pressure. SpaceX’s dual-class structure concentrates power in Musk’s hands. And at Meta Platforms , CEO and co-founder ​holds 60% of the ​voting power through a dual-class structure.

Anthropic is also planning to maintain its non-shareholder trustees that have a special class of ​stock and the ability to elect a majority of members to the company’s ​board of directors, according to media reports. The moves at Anthropic come ahead of later this year that could value the AI startup at $2 trillion.

Anthropic was last valued at $965 billion in a funding round.

Is SPCX Stock a Buy?

As Anthropic is not yet publicly traded, we’ll look instead at SpaceX. As one can see below, SPCX stock has a consensus Moderate Buy rating among 31 Wall Street analysts. That rating is based on 24 Buy, five Hold, and two Sell recommendations issued in the last three months. The of $232.35 implies 62% upside from current levels.

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