This is a business it's grown, it's trading at 28 times free cash flow with 20% growth, that will continue to compound. QUARTERLY LETTER 2022 | Vol.1 1345 AVENUE OF THE AMERICA S 33RDFLOOR NEW YORK, NY 10105 HAYDENCAPITAL.COM HAYDEN CAPITAL 2 May 20, 2022 Dear Partners and Friends, The last six months have been extremely painful - by far, the worst period since we started Hayden. c/o Altimeter Capital Management, LP. I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion. What is the connection between those three companies. He also asked Zuckerberg to cut down on capex and employee expenses. We also believe Metas investment in AI will lead to exciting and important new products that can be cross-sold to billions of customers. Rapid mobile adoption helped market leaders blaze through the s-curve with astounding growth rates and a historically low cost of capital made investments in people and things the rational economic decision. Even excluding its large metaverse investment, Meta has gone from $15B in annual capex in 2018, 2019, and 2020 to $30B in annual capex in 2022. To accomplish this goal, we recommend a three step plan that will double FCF to $40 B per year and focus the companys teams and investments: Getting Fit Headcount Reduction / Expense Control. They're fearful about the war. A securities lawyer, Brad Gerstner graduated from HBS in 2000 and joined General Catalyst. 3. Meta changed its company name from Facebook to better focus on its VR hardware and software and is spending $10 billion per year on the technology. While the increased AI investment was clearly well timed, Metas investment in the metaverse, while smaller than the AI investment, has gotten the most attention and has led to much confusion. Altimeter is focused on technology investment, and has found multi-billion-dollar success. Ram Parameswaran is the founder of Octahedron Capital, a global, growth-oriented investment firm that seeks to make concentrated investments in leading public and private companies that drive the world's internet economy. And what is going to be the resolution to the situation in the Ukraine? He argued that this was "one of the big reasons behind these price cuts.". So we believe not only you're going to get dramatically accelerated earnings, right, we think they're going to be a little bit more cautious about how they're spending those meta investment dollars, how they're spending dollars across the business. WAPNER: I know I know you're not happy about it. At the end of the second quarter this year, Altimeter Capital held more than 2 million shares of Meta. Altimeter Capital Management, LLC. FTX, once the third-largest centralized cryptocurrency exchange, is now in U.S. bankruptcy. Warren Buffett's: Berkshire Hathaway. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2022/03/14/we-could-go-lower-before-we-go-higher-in-stocks-says-altimeter-capitalas-ceo-brad-gerstner.html. Subject: Meaningful Board Change Required I can't tell you what's going to happen the next three days or the next three weeks or even three months. The conventional wisdom press and investor is that the core business hit a wall last fall. March 2013 Protocol ALID: 66704. To put that in perspective, it merely takes the company back to mid-2021 levels of employee expense and I dont think anybody would argue that Meta wasnt sufficiently staffed in 2021 to tackle a business that looks similar to how it looks today. If you click the "Accept" button, you consent to the use of cookies on our website. GERSTNER: Well, the first thing I would say is this, set aside SPAC. Meta has spent billions and hired thousands of employees around the world to build the metaverse, which refers to a shared digital environment that uses augmented or virtual reality technology to make it feel more realistic. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. ISDA fosters safe and efficient derivatives markets to facilitate There is no doubt that doubling annual FCF will improve share price. As such, we would encourage the company to move aggressively and cut at least 20% of employee-related expenses by January 1, 2023. They were buying goods, soccer balls on DICK's Sporting Goods and candles on Williams Sonoma. Frankly, if I was Sea Limited, if I was Uber, I might be looking at consolidating the business. But Meta needs to get its mojo back. An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards. 2023 International Swaps and Derivatives Association, Inc. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Choose your reason below and click on the Report button. Welcome to "Overtime.". So I think they got to match the investment to the revenue growth of the business. effective risk management for all users of derivative products. What am I supposed to think about that? Protocol: We have $130 oil and $6 gas at the pump. In his open letter, Gerstner asked Meta to cap its expenditure on the metaverse to $5 billion a year from the current announced investment of $10-15 billion. What is the rate of increase? You know, I told people at the time that, you know, there's risk in making these investments, right, we're shareholders of this, we've lost capital. Meta can get its mojo back, says Brad Gerstner, but it will have to take some hard decisions first. Our six nominees have the necessary skills, leadership abilities, and relevant experience to catalyze a United course change and to help the Company realize its immense potential. It's been a big drawdown this year. If multiples expand then you have even more upside. To put it in perspective, Roblox was a couple percent position for us, right, and Snowflake was a 30% position for us. Altimeter Growth Corp., the blank-check company merging with internet giant Grab Holdings Inc., is hovering just a few cents above its record low after cratering 28% since the deal was unveiled in . How many increases? I imagine they're going to be super aggressive about how they're buying back shares. It will get there three years from now because it's free cash flow margin will continue to expand and if you just get it, give it the multiples that are currently in the market, right, that have already drawn down on free cash flow, you get to that 3X that I quoted. The silver lining is that unlike many companies, this popular narrative obscures the truth. ", Jitesh Ubrani of market research firm IDCpointed outthat Meta's year-over-year VR shipments plunged 93% in the fourth quarter, while those of Pico from rival ByteDance rose 110%. Moreover, Meta has industry leading capabilities in key future technologies like artificial intelligence and immersive 3d that will help drive new products and future growth. Grab Holdings is reportedly in talks to go public through a merger with a "blank check" company that could value the Southeast Asian ride-hailing startup at as much as . Round: Series D Description: Ro is a telehealth startup that operates digital health clinics for men's and women's health, along with smoking cessation. Mark Zuckerberg is a self-made billionaire and the CEO of Meta (formerly Facebook), which he co-founded in his dorm room in 2004. In the letter, Gerstner said Altimeter Capital doesn't have demands and simply wants to engage with Meta management. The Wall Street Journal reported on Thursday that Grab was in talks with Altimeter. United has a Clear Record of Sustained and Substantial Underperformance: Despite premier, industry-leading strategic assets such as significant scale advantages, strong brand recognition, hubs in key business markets, and membership in the largest global airline alliance United has been the worst-performing U.S. airline stock over the last five years. 15 Why 20%? Perhaps it was the re-naming of the company to Meta that caused the world to conclude that you were spending 100% of your time on Reality Labs instead of AI or the core business. Unlock your 30 days free access to ETPrime now. The average tech IPOs down almost 50% from last year, SPACs much worse, direct list bad, all stocks that were taken public last year now it's clear were overvalued relative to where the world is trading them today. I think we spent about an hour together. This heavy equipment maker is a good buy on dips stock; heres why, Tears from smokeless cooking gas as consumers continue to bear price hikes on top of subsidy cuts. . Further strengthening our own conclusions, your seemingly desperate actions yesterday appear as a transparent and cynical attempt to maintain your official privileges and power, despite your long historical record of deficient oversight on behalf of stockholders. These are not numbers on a spreadsheet. On Oct. 11, Meta announced a new high-end VR headset, the Quest Pro. Rapid mobile adoption helped market leaders blaze through the s-curve with astounding growth rates and a historically low cost of capital made investments in people and things the rational economic decision. Is it all about rates at this point, especially when you're talking about the kinds of vulnerable stocks that we've really had front and center, those being tech? Our best guess is that maintenance capex for Meta is less than $10B annually. With all of that said, we believe the company can responsibly and reasonably reign in capex while continuing to invest aggressively in AI and other critical areas. Recently Active; Top Discussions; Best Content; WSO Media; BY INDUSTRY; Investment Banking Privacy Policy, ISDA uses cookies to enhance your experience on our website. Altimeter Capital Chair and CEO Brad Gerstner, in an open letter to the company, said Meta has too many employees and is moving too slowly to retain the confidence of investors. Its founder faces criminal and civil charges and goes to trial in October. Mar 11, 2021 3:07 PM EST. As a result, the team hastily pivoted the company toward the metaverse including a surprise re-naming of the company to Meta. We hereby appoint ISDA as our agent for the limited purposes of the Protocol Agreement and accordingly we waive, and hereby release ISDA from, any rights, claims, actions or causes of action whatsoever (whether in contract, tort or otherwise) arising out of or in any way relating to this Adherence Letter or our adherence to the Protocol Agreement or any actions contemplated as being required by ISDA. articles a month for anyone to read, even non-subscribers! To experience the full functionality of the ISDA website, it is necessary to enable Javascript in your We're withdrawing trillions off the Fed's balance sheet. Brad Gerstner founded the. Altimeter. Bill McColl has 25+ years of experience as a senior producer and writer for TV, radio, and digital media leading teams of anchors, reporters, and editors in creating news broadcasts, covering some of the most notable news stories of the time. United has an Underqualified, Ineffective, and Entrenched Board: While presiding over United's stunning long-term underperformance, we believe that the incumbent Board (and a majority of the newly-expanded 15-person Board): (1) lacks sufficient leadership, expertise, and experience to challenge management and hold management accountable, to direct an operational and financial turn-around, and to maximize stockholder value; (2) has entrenched itself by implementing various mechanisms to financially penalize stockholders for making meaningful Board changes; (3) has failed to adequately align management compensation with stockholder interests; and (4) is too stale to effectively represent stockholders. Investopedia does not include all offers available in the marketplace. WAPNER: I want to take a look at the stock in "Overtime" here because I think you're moving in I'm looking at what looks to be a higher move as we're having this conversation and that brings me frankly, now to Facebook. GERSTNER: So let's talk for a second about what I called. Ro $500.0M. Altimeter manages a long / short public equity fund and private growth equity funds. Brad Gerstner is the Founder & Chief Executive Officer at Altimeter Capital based in Boston, Massachusetts. It includes reducing headcount expenses by 20% and limiting the company's pricey investments in "metaverse" technology to no more than $5 billion per year. International Swaps and Derivatives Association. And then take that part of the world. PLAN. There is no doubt that doubling annual FCF will improve share price. United Urgently Needs a Course Correction: United's stockholders, customers, and employees deserve better Board governance, better Board leadership, and better Board performance. We certainly our base case, as you know, was a soft landing four to five rate hikes into this year. Share Your Design Ideas, New JerseysMurphy Defends $10 Billion Rainy Day Fund as States Economy Slows, This Week in Crypto: Ukraine War, Marathon Digital, FTX. Altimeter Capital Management LP now owns 2,850,000 shares of the Internet company based in Singapore's stock worth $131,784,000 after purchasing an additional 1,600,000 shares during the last quarter. PAR Capital Management, Inc. Do Not Sell My Personal Data/Privacy Policy. It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people. Our Standards: The Thomson Reuters Trust Principles. Crowdfunding is the use of small amounts of capital from a large number of people to raise money or fund a business. "In addition, people are confused by what the metaverse even means," Gerstner wrote. If the deal goes through, it. Adani Group on Thursday said US-based boutique investment firm GQG Partners has picked up equity stakes worth $1.87 billion (15,446 crore) in four listed group companies Adani Ports and Special Economic Zone, Adani Green Energy, Adani Transmission and flagship Adani Enterprises via secondary share sales. Now they've told us that they're going to achieve 15% free cash flow margins this year, five years early, right, while still growing 100%. However, there are few signs that VR or some of the company's metaverse apps, such as Horizon Worlds, are catching on with the public beyond early adopters. I've got some people including a guy coming up in a little while Mike Wilson who suggested at this point bonds may be a better deal than stocks. Instead, the company has announced investments of $1015B per year into a metaverse project that largely includes AR / VR / immersive 3D / Horizon World and that it may take 10 years to yield results. WAPNER: I wanna, I want to take a break and get into some of those names of all four but before I do that lastly, you mentioned very interestingly that you've taken your bond short off. As such, we would encourage the company to move aggressively and cut at least 20% of employee-related expenses by January 1, 2023. The changes for the Quest 2 begin Sunday, March 5. Louis Bacon's: Moore Capital Management. Read More . Skip to main content. The stock today hit a new low under $3. 2499 1749, Monthly That was our baseline that we were going to have a relatively soft landing, three to four rate hikes. Facebook parent Meta Platforms (META) announced that it would reduce selling prices for its Quest virtual reality (VR) headsets. Tina Sharkey, CEO of SherpaFoundry; former board member of HomeAway; and The Singaporean rideshare giant Grab is set to merge with the SPAC Altimeter Growth 1, according to a report from The Financial Times. It has 24 billion in free cash they're going to generate this year. Focusing the Metaverse: the Next Generation of Communication and Collaboration. If you look at the company, it's now trading at $5 billion enterprise value. Samooha, a startup developing a "cross-cloud" data collaboration platform, today announced that it raised $12.5 million in a funding tranche backed by Altimeter Capital and Snowflake Ventures . 2023 Benzinga.com. Copyright 2023 Bennett, Coleman & Co. Ltd. All rights reserved. GERSTNER: Scott, I love that you asked the question. But I am confident these companies like Snowflake, like Uber, like Facebook are going to be worth more than they are today at significantly more if you look out two years. In short, Meta needs to get fit and focused. This company is perfectly positioned to capitalize on that they have the, the ad network to monetize it. About Altimeter Capital Altimeter is a global investment firm managing both public and private funds focused on the airline, travel, technology, internet, software, and consumer sectors. With the gains posted on March 3, Meta Platforms shares are up 54% this year. We have little doubt investors and others would happily support scaling up these investments as the ROI becomes more tangible even if still long-term. To accomplish this goal, we recommend a three step plan that will double FCF to $40 B per year and focus the companys teams and investments: Reduce headcount expense by at least 20%;Reduce annual capex by at least $5 B from $30B to $25B; andLimit investment in metaverse / Reality Labs to no more than $5B per year. Meta changed its company name from Facebook. It's our largest position in the book. The company has lost investor confidence as it ramped up spending and pivoted to the metaverse, the technology-focused hedge fund with a 0.1% stake said, and suggested a three-step plan. When you were with me in December, you said that you had picked some more of that up along with Snowflake. It's a better version of Zoom. A Division of NBCUniversal. Altimeter Capital Management, LLC a Portfolio Activity as reported in the most recent 13F form published on Dec 31, 2022. I just happen to look at a Snowflake it's in front of me and because it's your largest position, I say can Snowflake really get back to its 52-week high of $405 a share. Meta Platforms (META) shares jumped 6% after the tech giantannouncedbig price cuts for its virtual reality (VR) headsets. Now you didn't address any of the iOS changes and the revenue hit that Facebook is is assuming from that and those are legitimate changes. As always, happy to connect with you and your team. Despite public skepticism at times warranted we have been supporters Altimeter Capital Management LP Info Size ($ in 1000's) At 12/31/2022: $3,652,571 At 09/30/2022: $4,676,285 Altimeter Capital Management LP holdings changes, total fund size, and other information presented on HoldingsChannel.com was derived from Altimeter Capital Management LP 13F filings. So no, these issues are rea,l what's going on in Russia is real, what's going on in Europe is real. I'm not a seller. Perhaps it was the re-naming of the company to Meta that caused the world to conclude that you were spending 100% of your time on Reality Labs instead of AI or the core business. ", Twitter. Benzinga does not provide investment advice. It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people. Can it possibly be worth a trillion? Altimeter and PAR believe these experienced professionals can bring meaningful experience, objective oversight, and powerful change to United. Meta Platforms CEO Mark Zuckerberg speaks about the Facebook News feature at the Paley Center For Media in New York on Oct. 25, 2019. Meta shares moved 6% higher following the announcement. We want to hear from you. So were Shopify's and so were PayPal. I don't think there's any chance that the Fed is going to raise rates 10 times this year. Gordon Bethune, former CEO of Continental Airlines; board member of Honeywell, Prudential Financial, and Sprint; ET on GuruFocus.com Builders Union LLP Buys AppLovin Corp, Match. Altimeter Capital Chair and CEO Brad Gerstner said in an open letter to the company and CEO Mark Zuckerberg on Monday that Meta has too many employees and is moving too slowly to retain the confidence of investors. We did not see this talk of 10 rate hikes and we certainly didn't see a war developing in Europe. HONG KONG (AP) Southeast Asia's largest ride-hailing company, Grab Holdings, said Tuesday that it plans to merge with U.S.-based Altimeter Growth Capital in a deal that would value it at . So first, you need to understand why did we see a deceleration of revenue because that informs why we're going to see a reacceleration in the back half of this year. They just announced that they're going to be profit, full company profitable by 2023. And, while most companies will struggle to monetize AI, we believe Meta is incredibly well positioned to leverage AI to make all of its existing products better. The last 10 years have been a unique time in tech and for Meta. Conforti plans to join a new firm as a co-founder with. We are confident that these employees will find replacement jobs and quickly be back to work on important inventions that will move us all forward. Activist investor Brad Gerstner, founder and CEO of tech-focusedhedge fundAltimeter Capital, sent anopen letterto CEOMark Zuckerbergin October calling for a pullback in metaverse spending. There are a lot of companies with speculative business models, right, that are should have never been valued where they were valued and if you don't have absolute conviction, right, they can grow their product, grow their top line and grow their earnings to match where those earlier prices were, then you need to rotate those dollars out of those companies and into companies where you have that level of conviction. And frankly, they weren't a very good hedge because bonds haven't moved all that much but gross stocks are down 60, 70, as you mentioned, down over 80%. Those decisions include slashing expenditure and reducing headcount, the CEO of Altimeter Capital told Meta founder Mark Zuckerberg in an open letter. And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. When you look at these questions, it comes down to this. I think they have to take a look at their capital allocation plan. Altimeter Capital Management LLC. You know how to time markets. By any normal company or start up standard, $5 B per year would seem like an extraordinary amount. They're building their own ad platform, right, that can deal with this. I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. And as a result, you know, last year we held up better than most because we own high-quality stocks, and we were short lower quality stocks. Where's your exposure today? And we are confident that your long-term investments in AI and the next generation of communications will continue to drive us all forward. Its competitor or not its competitor, its closest comp in Southeast Asia Sea Limited is also down over 70%. I think, or inflation, I think they're behind the curve on recession. It makes no sense to me, but that is the risk that you run. Meta. We are confident that these employees will find replacement jobs and quickly be back to work on important inventions that will move us all forward. This is a company that only did 1.2 billion in revenue last year. Despite public skepticism at times warranted we have been supporters of the companys strategy to continuously reinvest in a product-led future and its mission to make the world more open and connected. Founder & Chief Executive Officer at Altimeter Capital . What do you think? It just launched in 150 countries, has over a billion views. 16,839 Followers. A ltimeter Growth Corp. 2, the second blank check company formed by Altimeter Capital targeting the tech sector, filed on Thursday with the SEC to raise up to $200 million in an initial public. He left GC and became co-CEO of NLG, an early online travel start-up purchased in part by IAC.He co-founded Openlist.com, a local search start up that was self-funded and sold to Marchex (Nasdaq: MCHX);He was a partner at PAR Capital, a multi-billion hedge. for a description of how we use cookies. Of course, a company that connects nearly three billion users on phone and text must be investing in the next generation of communication. As I look at it, the market is now pricing in at least seven rate hikes. Facebook's revenues in Q1 were lower than people expected. The conventional wisdom press and investor is that the core business hit a wall last fall. It's also a vote of less confidence about the company's ambitions in the world of virtual and augmented reality. Panel led by former SC judge to include NaBFID chair KV Kamath and Infys Nandan Nilekani. We believe the future lies in AI. We know they have high EBITDA margins on the rideshare business which is dominant across the region. It's good to see you again. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. The answer to that is because people are very fearful. This would double annual FCF and put FCF as a percentage of revenue more in line with Google, Microsoft, and Apple. Chase Coleman's: Tiger Global Management. It added that VR is "a powerful social platform and creative technology, and the more people with access to it, the better. https://www.cnbc.com/video/2022/03/14/we-could-go-lower-before-we-go-higher-in-stocks-says-altimeter-capitalas-ceo-brad-gerstner.html. CAPEX Investing Aggressively and Responsibly in the Future of AI. As between each other Adhering Party and us, the amendments in the Appendices to the Protocol shall apply to each Protocol Covered Agreement to which we are a party in accordance with the terms of the Protocol and this Adherence Letter. Getting Fit Headcount Reduction / Expense Control. What is the metaverse and why are billions of dollars being spent on it? But listen, there's massive uncertainty in the world. CAPEX Investing Aggressively and Responsibly in the Future of AI. I have been told that Amazon spent far less in total to build AWS. FTX founder Sam Bankman-Fried was not only a tireless fundraiser from venture capital firms including Paradigm and Sequoia Capital, but also quietly made investments in those same funds, according to two people familiar with the matter.
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