Will Meta be broken up? Is it bullish or bearish?
Recently, Meta has been at the center of a storm due to an antitrust lawsuit initiated by the U.S. Federal Trade Commission (FTC). This long-brewing case accuses Meta of eliminating competition through "killer acquisitions" and demands the spin-off of Instagram and WhatsApp. If the court ultimately supports the FTC's claims, Meta could face the most significant structural shake-up in the tech industry in a decade—divesting two super apps with 2 billion and 2.4 billion users, respectively.
Despite being embroiled in legal turmoil, Meta has shown remarkable resilience in the market this year. As of mid-April, its stock price had dropped by only 9.5%, second only to Microsoft among the "Magnificent Seven." This resilience is largely due to Instagram contributing nearly 60% of the group's total ad revenue and Meta's continued investment in AI infrastructure. However, the antitrust cloud looms large—on the first day of the trial, April 14, Meta's stock price fell by over 2%, reflecting market anxiety over a potential breakup.
From a capital market perspective, there are two divergent narratives about the spin-off. Optimists argue that if Instagram and WhatsApp were to go public independently, they could unlock growth premiums currently obscured by Meta's consolidated valuation. Take Instagram, for example: its ad load is nearing user tolerance limits, but as a standalone entity with clearer financial disclosures and a differentiated entertainment-social positioning, it might attract a higher P/E ratio. However, this scenario may be overly optimistic—the reality is more complex. Currently, all three platforms deeply share Meta's AI algorithms and data infrastructure. Instagram's recommendation system relies on Llama, a large language model developed by its parent company, while WhatsApp's monetization depends heavily on Meta's ad tech. Severing this technological synergy could jeopardize their sustainability as independent entities.
Drawing lessons from eBay's spin-off of PayPal in 2015, which led to a decline in both stocks, the market worries that Meta's loss of cross-platform traffic integration could significantly reduce advertisers' budget efficiency. Imagine a fashion brand that currently uses Meta's unified platform to push content on Facebook, showcase short videos on Instagram, and handle customer service via WhatsApp. Post-breakup, these three touchpoints could become data silos, leading to lower conversion rates and directly impacting ad pricing.
Monopoly accusations often arise when new players want a slice of the pie. Take WeChat in China—it dominates the messaging market, and if new capital tried to muscle in, even Jack Ma might face lawsuits.
The FTC has narrowly defined the "personal social network" market as 熟人社交 (close-friend 社交), excluding entertainment platforms like TikTok from the competitor list. Meta has fiercely contested this artificial market delineation. Intriguingly, some Wall Street analysts are now advising Meta to proactively spin off businesses to avoid regulatory risks.
Amid broader market trends and antitrust disputes, Meta's recent declines have nearly erased its earlier gains. Technically, there's still room before hitting support levels. Investors are torn between hoping for value 释放 (unlocking) from a breakup and fearing the chain reaction of lost synergies. Rather than agonizing, some are eyeing potential buying opportunities before Mark Zuckerberg's testimony—Meta's fundamentals remain solid, and unlike other giants, it's minimally affected by tariffs.
$Meta Platforms(META.US)
The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.
