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Meta Shares Drop Amid Lawsuit Concerns After US Verdicts

  • 3 days ago
  • 2 min read

Meta Platforms shares dropped 7% after two verdicts found the company liable for harm to young users. This sparked fears that the social media giant may need to overhaul the design practices that underpin its sprawling advertising business.


3D Meta logo with a blue infinity symbol on a white, square background, centered on a gray gradient backdrop.
Credit: UNSPLASH

Fines from the US trials in New Mexico and Los Angeles totalled USD hundreds of millions. Experts and investors said the verdicts could expose the company to a wave of litigation, potentially bypassing a federal law.


This law has long protected online platforms from liability for user-generated content. Experts stated that targeting platform design could prove crucial in thousands of lawsuits across the US, alleging harm from social media platforms.


Such cases could result in USD billions in fines and compel changes that might alter investor sentiment towards social media stocks. The rulings add a new layer of uncertainty for Meta, which is investing tens of billions of dollars in artificial intelligence.


"These decisions do not break the business model today, but they raise the range of outcomes around future cash flows and margin structure," said chief executive officer Adam Sarhan of 50 Park Investments. He added that Meta investors were "repricing legal and regulatory risk after the recent verdicts."


Meta shares were trading near 10-month lows. Alphabet shares were down 2.8%, while Snapchat-parent Snap slumped 12.5%.


Both Meta and Google, also found liable in the trials, plan to appeal the verdicts, indicating a prolonged legal battle.


In the Los Angeles case, a jury found Meta and Google liable for a young woman's depression, linked to alleged addiction to Instagram and YouTube. The jury awarded USD 6 million in damages.


In the New Mexico case, jurors ordered Meta to pay USD 375 million. This was for misleading users about the safety of its platforms for children and enabling their exploitation.


Snap and TikTok were also defendants in the California trial. Both companies settled with the plaintiff before the trial commenced.


Meta and other social media companies face more than 2,400 cases centralised before a single judge in a California federal court. These claims allege their platforms harmed the mental health of young users.


Thousands more cases are consolidated in California state court. Ken Mahoney, chief executive officer of Mahoney Asset Management, stated, "Financially, multiple verdicts could total billions of dollars in damages and legal costs, especially if courts hold the company liable for platform design rather than just user content."

  • Meta Platforms shares dropped 7% following two US verdicts holding the company liable for harm to young users.

  • The verdicts spark fears of extensive litigation that could bypass federal protections for online platforms.

  • Verdicts included USD 6 million in damages for a Los Angeles case and USD 375 million for a New Mexico case.


Source: REUTERS

 
 
 

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