Economic theory teaches that stock prices usually are brutally honest. When investors are deciding whether to put money into a company or venture, social niceties typically go out the window, and investors–particularly the professional money managers–take a hard look at the company’s products and business plan and make an unvarnished judgment about whether they will succeed or fail. If the product line looks like a winner, buy decisions will follow; if products and sales are disappointing, the sell sign flashes.
The stock market’s honest judgment is saying something is wrong at Meta, the parent company of Facebook, Instagram, and WhatsApp that is trying to introduce us to the “metaverse”–the virtual world pictured above. And the consequences have indeed been brutal: Meta closed at $323 a share on February 2, 2022 and $97.94 yesterday. Yesterday alone, the stock price fell $31.88 a share, losing 24.56 percent of its value, and the stock information page linked above says Meta’s “technicals” put the stock down into the “strong sell” category. In short, if you’re a shareholder in Meta, you’ve had a bad year, and apparently some investors have decided enough is enough.
Why has this happened? Some observers believe that Mark Zuckerberg, the Meta kingpin whose metaverse avatar is seen above, has unwisely focused all of the company’s attention on the metaverse, rather than protecting and nurturing the company’s core assets, like Facebook, which are facing their own problems. And the effort to summon the future in the form of the metaverse hasn’t gone well. So far, at least, people haven’t jumped at the chance to don virtual reality headsets, create an avatar of themselves, and interact with other people in interactive virtual spaces. The fact that the headsets are expensive–Zuckerberg recently introduced a new headset that goes for $1,500 a pop–and the virtual reality graphics don’t look all that compelling isn’t helping. One of the recent developments announced by the company, that metaverse characters will now have legs, sounds like a funny parody of a bad TV commercial. “Metaverse characters–now with legs!”
Meta’s struggles reveal a basic truth about technology companies: sometimes the tech product is a huge hit, but many times it isn’t. For every smartphone or personal computer that are wild successes, there are other devices or concepts that crash and burn. And it looks like the metaverse that Meta had invested billions in developing might just fall into the latter category. A recent article in Forbes expressed the point this way: “The entire problem with Mark Zuckerberg’s fascination with the metaverse is that he’s trying to force a sci-fi reality to happen long before the rest of the society wants or needs it to actually exist.”