Meta Platforms shares fell as much as 7.6% on Thursday after the company reported third-quarter results and announced a new class of non-voting stock. Revenue beat estimates, but a legal charge and the share structure change weighed on the stock.
Meta Platforms shares fell as much as 7.6% on Thursday, and as of 1:10 p.m. ET the stock was still down 7.2%. The Motley Fool attributes the drop to the company's financial results and a change to its stock structure.
Revenue beats estimates despite a legal charge
For the third quarter, Meta's revenue grew 26% to $64.6 billion, driven by advertising. Diluted earnings per share (EPS) were $3.83, up 265%.
However, the company took a $9.9 billion charge tied to its recent legal settlement over teen social media addiction. Excluding the charge, EPS would have been $7.40, against analyst consensus estimates of $63.4 billion in revenue and EPS of $5.46.
Daily active users rose 3% year over year to 3.64 billion. Ad impressions increased 10% and the average price per ad rose 14%.
New non-voting Class C shares and a 2-for-1 split
The share structure change was the headline. Meta's board established non-voting Class C shares, effective Jan. 19, 2027. According to the report, the company created the class to raise capital for rising AI expenses, employee compensation, and potential acquisitions.
Meta will also use the new class to effect a 2-for-1 stock split early next year, though the timing is still up in the air. The structure lets CEO Mark Zuckerberg keep a more than 60% voting interest through Class B shares, which carry 10 votes each, while Class A shares carry one.
Record New Mexico judgment adds legal risk
New Mexico also hit Meta with a record $25 billion judgment over user privacy in connection with the 2018 Cambridge Analytica scandal. Meta has said it will appeal.
At 22 times earnings, Meta trades below its 3-year average multiple of 27. The Motley Fool notes that investors should consider the risk from its legal exposure.
Source: Motley Fool
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