What Happened to Meta Stock After the Privacy Fine — And What It Means for Future Investments
Written by
Martin Dasko
Edited by
Chris Cluff
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As a stock market investor, you have to stay alert to the recent news with the companies that you’re investing in. One piece of news you likely heard about was the data privacy fine that Meta received after a ruling from a European court in May. While a billion-dollar fine could bankrupt some companies, some analysts felt this was simply an inconvenience for the tech giant. But what’s it mean for your investment in the future?
What’s the Data Privacy Fine About?
Meta was hit with a record-breaking fine of $1.3 billion on May 22, 2023, much higher than the previous EU record when Amazon had similar privacy issues in 2021. The ruling came from Ireland’s Data Protection Commission, where regulators determined that Meta had illegally stored the data of EU users on the services in the U.S. Meta has been ordered to halt the transfer of Facebook data of citizens from the EU to the U.S. and to delete the data that has already been sent over.
The ruling has a grace period of five months, so Meta has time to comply. It’s also worth noting that this data-sharing ruling only applies to Facebook, leaving Instagram and WhatsApp exempt. Meta has stated that there wouldn’t be any prompt visible service issues with Facebook in the European Union.
Meta feels the company is being unfairly singled out when thousands of other companies engage in similar data-sharing activities. The company hopes the new data agreement between the U.S. and the EU will replace the one invalidated by the European courts three years ago. A preliminary deal was announced last year, but companies are still waiting for the exact details. Meta sent out a warning last year that it might have to cease operations in Europe if a deal wouldn’t get worked out. This would cause a noticeable decline in ad revenue, which would hurt the company’s bottom line.
What Happened to Meta Stock After the Fine?
The fine was announced on May 22, and shares of Meta were down 0.6% in the premarket trading on that Monday morning. While some analysts were concerned about the consequences of this hefty fine on the share price, the market didn’t react with any apprehension.
Here are some of the key highlights of Meta’s stock and the EU fine:
- Meta stock closed at $245.64 the weekend before the fine was announced.
- Meta stock closed at $248.32 on the day of the fine.
- By the end of that week, Meta’s share price reached $262.04.
- Meta stock closed at $314.31 on Aug. 2 and is up about 150% for the year.
Meta’s stock price is higher today than it was around the time of the announcement of the fine. The fine doesn’t appear to have made a difference in the share price of Meta. It’s worth mentioning that Meta held $37.44 billion in cash and equivalents as of March 31, 2023, so perhaps investors weren’t concerned about this fine hurting the company’s overall financial picture.
Could This EU Fine Impact Meta’s Stock?
Meta’s chief financial officer, Susan Li, informed investors that roughly 10% of the global ad revenue came from ads that were delivered to platform users in the European Union. For some perspective, Meta reported revenue of almost $117 billion in 2022.
However, since there’s a five-month grace period and with many global companies hoping for some sort of data-sharing agreement to be announced in the near future, it’s difficult to determine what the future impact will be on revenue. If Meta has to report a lower revenue by 10% at some point, this could negatively impact the stock price. Until then, all we can do is watch this situation unfold.
What’s Next for Meta?
We must also remember that the earnings reports and overall macroeconomic factors play a bigger role in a stock like Meta. We learned that the company isn’t immune to announced rate hikes to combat inflation as we watched the stock price tumble in 2022. However, 2023 has been a stellar year for the social media giant.
From a financial perspective, the company’s in a strong position, and it recently announced that revenue for the third quarter would exceed Wall Street’s expectations. With an expected revenue for the next quarter between $32 billion and $34.5 billion, the Meta stock looks to be in favor with analysts. To top this all off, Meta reported earnings for the second quarter at the end of July, and it beat analyst estimates with $32 billion for the period ending June 30. We have to watch this situation unfold with the EU to see if there could be any impact on Meta’s share price.
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