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Another 10,000 bite the dust

Meta returned to the headlines this week in a story which has become increasingly familiar in recent months, following wave after wave of big tech layoffs.

As reported by the New York Times, the Facebook and Instagram owner is set to sack another 13% of its workforce – or around 10,000 individual employees.

Founder Mark Zuckerberg has, presumably in yet another attempt to convince the public that he is not an AI-powered humanoid robot, described 2023 as the company’s “Year of Efficiency,” and it seems he will stop at nothing to trim the fat from the firm’s bloated workforce.

Meta’s recruiting team – perhaps unsurprisingly given that there is little recruitment going on at the moment – will be the first to be affected, before a restructuring of its tech and business groups will see those areas put under the microscope in April and May.

The firm already laid off around 11,000 staff in November, which was also some 13% of its total workforce at that time, and is now set to axe 5,000 job postings that had yet to be filled alongside the latest round of cuts.

Investors responded positively to the news, it seems, as shares in the tech giant jumped more than 7% by the close of trading on Tuesday, after the announcement was first made.

The NY Times laid out the now-familiar roadmap which has brought the company to this point.

Meta hoovered up all the talent it could find during periods of rapid expansion – for example following its acquisition of WhatsApp, or as mobile app usage boomed during the Covid pandemic.

As the old adage goes, however, what goes up must come down, and it seems the number of employees able to hold on at the tech giant is no different.

The article points to Amazon, Google, Microsoft and Salesforce all following a similar trajectory as they too attempt to cut down on costs amid a slowdown in the global economy.

It also points out that Zuckerberg’s big bet on the metaverse has yet to pay dividends, and that emerging technologies such as these continue to face an uncertain future.

So too do Meta’s remaining employees, who must now continue working, aware that the scythe may soon swing in their direction.

Silicon Valley Blunder

In more miserable business news, the Financial Times reported this week on the damage caused to tech start-ups by the much-publicised collapse of Silicon Valley Bank.

According to the piece, new firms are now “scrambling to deal with tighter regulation and the influence of larger banks that are set to replace the informal financial relationships and close personal connections that have characterised Silicon Valley Bank’s dealings with the sector.”

Naturally, the first priority of a lot of SVB clients on hearing rumour’s of the bank’s shaky position was to remove their cash and spread it around a bit, to avoid being reliant on a single bank again in the future.

“A lot of concentration in one bank in a highly connected community clearly turned out to be a very bad thing,” Laksh Aithani, founder of UK-based biotech company Charm Therapeutics told the FT

And, when you put it like that, it does seem fairly obvious.

Still, there were benefits for start-ups in the simplicity of holding all their cash in a single bank. 

Founder of sustainable period care start-up The Flex Company, and former SVB client Lauren Schulte Wang, told the FT that her firm had opened an account at JPMorgan over the weekend and planned to diversify further, but that the new set-up will inevitably make life more complicated.

SVB had previously touted itself as a one-stop shop for start-ups, with services designed around fitting their particular needs.

“There was always somebody you could speak to, no matter how small [the start-up],” Robin Klein, a VC investor at LocalGlobe, told the FT. “That’s very different from the big banks.”

The paper concluded that losing the bank is set to make life a lot more difficult for start-ups and their founders, eventually tilting technology markets further in favour of bigger platform companies with strong balance sheets.

Indeed, it said, the collapse of SVB marks the beginning of a new era for tech start-ups, who now have “to deal with the loss of a singular institution that had sought to provide for all their financing needs.”

While the media has been quick to reassure the public that the collapse of SVB does not precipitate a 2008-style global financial crash, one thing is for certain: The future is beginning to look a lot less bright for new businesses looking to shake up the tech world.

Why not have a flutter on… well, Flutter

Barron’s this week suggested that FanDuel’s parent company (as it’s known to Americans) remains a valuable buy, despite a recent rally in its share price following the announcement it may consider a dual listing in the US.

It pointed to FanDuel’s undeniable dominance in US sports betting, with around 50% market share, and its recent turn to profit in the market, making it the first licensed online bookmaker to do so.

Despite announcing significant growth in its Q4 and full-year 2022 earnings report, Flutter’s shares fell following its release, which Barron’s said was the result of investors underplaying the growth opportunity in the US and instead focusing (on this occasion) on apparent weaknesses in the Australian market.

The UK, of course, may also have played its part in the tumbling share price, with shares in the market currently trading at a record 40% discount to those in the US, according to Citi analysts.

Still, Flutter shares are up 24% so far this year, which Barron’s suggests means investors “are starting to wake up to the bigger picture.”

Susquehanna analyst Joe Stauff gives the stock a Buy rating and a target price of £163 – around 21% ahead of where it sits today.

He noted that the US market size for Flutter over the next two years is set to become as large as the nine largest countries it operates in today, combined.

According to Barron’s, the stock also “isn’t too expensive, trading at 24.7 times estimated 2024 earnings, lower than an average of around 34 times among a basket of competitors, according to FactSet data.”

Gambling reform in the UK could present a roadblock up ahead, but apart from that, it seems there are still plenty of reasons to have a punt on Flutter.

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