The recent rebranding of Facebook from its parent company to “Meta” is interesting on several levels. The change is discussed along the same lines as Google’s 2015 decision to rename its parent company “Alphabet”. Alphabet has allowed Google to venture into more markets than search, just as Facebook / Meta rebranding allows Facebook to explore areas such as virtual reality, augmented reality, and the idea of ​​public virtual spaces.

Facebook has actually been teasing this change in direction since the start of the year, when it started calling itself a “metaverse” company and trying to generate a buzz around shared virtual worlds for more than just games. The recent ad video featuring Mark Zuckerberg himself attempts to generate more buzz around the idea.

History doesn’t repeat itself, it rhymes

Why is this of interest to traders? Well, Aside from its implications for the course of action, there is a larger story here that deserves to be known. This isn’t the first time in recent history that Facebook has made a very public attempt to pivot. The last time he made such an effort was in the summer of 2018. That’s when he announced Libra, the company’s own digital currency for use in its business ecosystem. ‘applications.

If you look back, Facebook was caught in a storm of negative publicity, as it is today. In 2018, everything revolved around data protection and disclosures about abuse of the platform in order to influence the election results. This time it’s the Facebook Papers, a leaked set of documents suggesting the company knows a lot more about the deleterious effects of its platforms on users than it has hinted at. Both cases took place against a backdrop of uncertainty as to how these technology monopolies should be regulated and a general feeling that they are becoming too large and influential to be left on their own.

The initial reaction to Facebook’s announcement of the Libra currency echoed wider concerns about its size and influence. A business with a user base of billions and its own currency suddenly begins to resemble a sovereign nation rather than a legal person, and this has not been lost on regulators, policymakers and central bankers in the world. ‘era.

The markets of yesterday and today

What’s even more interesting are the parallels in the timing and market regime of these two Facebook moves. As you can see in the Facebook weekly stock chart below, both are hitting or hitting all-time highs for the company’s shares. They are also taking place in a bull market that appears to be heavily overloaded. In 2018, Facebook’s announcement preceded the worst correction of a decade as U.S. markets reacted to Jerome Powell’s latest rate hike (and some would say fatal). Today, US markets are trading around 60% higher than in 2018, in a time of almost total global uncertainty, with one central bank after another becoming hawkish and the same J. Powell at the helm attempting to tighten again.

So, we have a company that ostensibly tries to shake off a bad reputation by venturing into other areas of potential growth (in 2018 it was cryptocurrencies, in 2021 it is metaverse), to the tail of an extended bull market, in an environment of increasing hawkishness of central banks. The last hike of 2018 was actually the 9e since 2015. How many will it take in 2022 for the market to have a tantrum? So far in 2021, markets still seem to be playing chicken with the Fed’s rhetoric about reducing asset purchases and raising rates at least twice next year.

Back to facebook

What about the stock itself? What does all of this say about his future prospects? It’s hard to say anything with authority in a stock market so far removed from fundamentals. A perfect example of this is Meta Materials (ticker: MMAT), an unrelated company that rallied 18% on Facebook news simply because of its similar name.

What we can say with some certainty is that with the two pivot attempts, the company seems to be entering a territory that is quite foreign to it; in areas where many innovations are already being made natively. What is the likelihood that Facebook will be able to innovate in one area or the other? Facebook may assume that its size and network effect will allow it to compete in any vertical industry. It just might be. On the other hand, this may turn out to be a flawed assumption, especially when the very issues that have tarnished its reputation so far are even more relevant to 1. the money people use and 2. the parties. of themselves that they choose to keep private by frequenting the virtual worlds of the future.

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