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Apr 28, 2023

The week in investor relations: Meta sales rise while Reality Labs’ drop, Coinbase challenges SEC and UK investors urged to back domestic firms

Our pick of the IR stories from around the web you might have missed this week

– According to CNBC, Meta’s first-quarter sales rose 3 percent from $27.91 bn a year earlier, after three straight periods in which revenue declined. For the second quarter, Facebook parent Meta expects revenue of between $29.5 bn and $32 bn, while analysts were expecting sales of $29.5 bn. ‘We had a good quarter and our community continues to grow,’ said Meta CEO Mark Zuckerberg in a statement. The company is ‘becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long-term vision,’ he added.

Meta’s Reality Labs unit, which is developing the virtual reality and augmented reality technologies for the metaverse, brought in $339 mn in sales but logged an operating loss of $3.99 bn. 

– Cryptocurrency exchange Coinbase took action against the SEC, asking a federal court to compel the agency to respond to its demand for clearer crypto regulations, Decrypt reported. The exchange sent the SEC its so-called ‘petition for rulemaking’ last July and asked the regulator to propose and adopt rules for digital assets securities. It also sought answers to 50 specific questions that would provide ‘clarity and certainty regarding the regulatory treatment of digital asset securities.’ Some of the questions center on the SEC’s methodology for classifying certain tokens as securities, while others focus on topics like asset custody and trading crypto asset securities on SEC-regulated exchanges. 

– According to Financial News, UK investors need to back more British companies if the City of London is to be attractive for listings. ‘A single Canadian pension fund invested more in one UK private company in 2021 than all of our pension funds did,’ London Stock Exchange CEO Julia Hoggett told MPs on the treasury committee on April 26. The comments came days after Financial News revealed City leaders were making a fresh push to bolster UK listings amid an IPO drought. Hoggett said UK firms were investing around three times more abroad than they were at home and that 70 percent of UK fintech funding came from overseas.

– The Financial Times (paywall) reported the old market adage that low valuations are a ‘necessary but insufficient’ condition when looking to buy securities. That feels especially true for smaller listed companies in the US today. Several metrics suggest valuations of smaller US companies are increasingly attractive for buyers, especially compared with stocks that have larger market capitalizations. From the latest respective peaks, the Russell 2000 benchmark for smaller caps has lost about 26 percent, twice as much as the S&P 500 through late April.

– Meanwhile, according to Yahoo!Finance, Australia’s sovereign wealth fund, the Future Fund, is looking to buy small-cap equities for the first time as traditional investments like blue-chip firms and real estate are no longer safe, the fund’s CEO said earlier this week. Raphael Arndt said investments like office buildings or shopping centers offer less safety and a large-cap company could be split up, regulated or have its markets disrupted.

‘There are no set-and-forget investments anymore,’ he said at the AFR Alpha Live 2023 conference in Sydney. ‘Markets are constantly changing and we must evolve our strategy in response. For example, changes in domestic markets have made small-cap equities attractive to us for the first time and we have commenced a new program to invest in them in recent months.’

– The classic commodities recession play of switching from oil to gold is well under way, but it’s far from a smooth progression as investors juggle signals from the Federal Reserve and China’s stuttering post-virus recovery, Bloomberg (paywall) reported. The oil-gold ratio – the spot price of bullion divided by West Texas Intermediate oil futures – is a barometer for the state of the global economy, with higher readings suggesting investors are positioning for a recession. The ratio has been rising since mid-2022 and spiked in late March as the banking crisis boosted gold’s allure as a haven. The last time there was a dramatic move in the ratio was in 2020 as Covid-19 engulfed the global economy, pushing up gold and sending oil into a tailspin.

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