Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
TWITTER VS. INDIAN GOVERNMENT: Twitter (TWTR) is challenging the Indian government in court over its orders to block tweets and accounts, saying some were excessive and outside the scope of officials' legal authority, The Financial Times' Chloe Cornish reported. Two people briefed on Twitter's case said the company decided to challenge the Indian government's blocking orders after officials threatened to open criminal proceedings against its New Delhi-based compliance officer. Reportedly, the government had also threatened to strip the social media giant of the immunity it gains from being a platform, rather than a publisher, if it failed to follow instructions to block certain tweets, the people said. Notably, an amendment to India’s Information Technology Act filed in 2021 requires social media companies to appoint a compliance officer, who can be punished with imprisonment for up to seven years, as well as a fine, if the company does nor comply with a government blocking order.
PARTNERSHIP VP: Twitter has hired Maggie McLean Suniewick from NBCUniversal Media (CMCSA) to be its new vice president of partnerships, overseeing teams in charge of global alliances, business development and developer relations, Kurt Wagner of Bloomberg reported. Suniewick was most recently president of distribution and business development for NBCU’s digital properties. She is credited with leading a number of the company’s digital investments, including those in Snap (SNAP) and Vox Media Inc., according to a statement from Twitter.
SUBPOENAS: In a regulatory filing last week, Digital World Acquisition (DWAC) has been informed that on June 27 Trump Media & Technology Group, or TMTG, received a subpoena from the SEC seeking documents relating to, among other things, Digital World and other potential counterparties for a business transaction involving TMTG. Digital World has also been informed that on June 30, TMTG was served with a subpoena, issued by a federal grand jury sitting in the Southern District of New York, seeking a subset of the same or similar documents demanded in subpoenas to Digital World and its directors. Certain current and former TMTG personnel have also recently received individual grand jury subpoenas.
FLORIDA SOCIAL MEDIA BILL TAKES EFFECT: SB 7072 establishes a violation for social media deplatforming of a political candidate or journalistic enterprise and requires a social media platform to meet certain requirements when it restricts speech by users. The bill prohibits a social media platform from willfully deplatforming a candidate for political office and allows the Florida Elections Commission to fine a social media platform $250,000 per day for deplatforming a candidate for statewide office and $25,000 per day for deplatforming any other candidate, in addition to the remedies provided in ch. 106, F.S. If a social media platform willfully provides free advertisements for a candidate, such advertisement is deemed an in-kind contribution, and the candidate must be notified. The bill also establishes restrictions for receiving economic benefits or contracting with public entities for certain social media platforms who have violated antitrust laws and who have been placed on the Antitrust Violator Vendor List. The Department of Management Services is required to maintain the Antitrust Violator Vendor List of the names and addresses of the people or affiliates who have been disqualified from the public contracting and purchasing process. The Attorney General is authorized to place an entity on the Antitrust Violator List on a temporary basis under specified circumstances. The bill provides for exceptions from the applicability of the antitrust violator provisions. A social media platform that fails to comply with the requirements under the bill may be found in violation of the Florida Deceptive and Unfair Trade Practices Act by the Department of Legal Affairs. Additionally, a user of a social media platform may bring a private cause of action against a social media platform for failing to apply consistently certain standards and for censoring or deplatforming without proper notice. These provisions took effect July 1
NATIONWIDE SHIFT: According to Rebecca Kern of Politico, Florida's legislation is just the tip of the iceberg when it comes to efforts to police speech on social media. Lawmakers in 34 states have pushed bills that are setting up court battles with tech giants over the First Amendment. Legislators have introduced over 100 bills in the past year in an effort to regulate how social media companies such as Meta Platforms' (META) Facebook and Twitter handle their users’ posts, according to Politico’s analysis of data from the National Conference of State Legislatures. The 11th U.S. Circuit Court of Appeals ruled that Florida’s law was largely unconstitutional, and the Supreme Court blocked the Texas law for now.
ANALYST COMMENTARY: Barclays analyst Ross Sandler lowered the firm's price target on Snap (SNAP) to $20 from $42 and maintained an Overweight rating on the shares. Additionally, Sandler lowered the firm's price target on Pinterest (PINS) to $20 from $24 and kept an Equal Weight rating on the shares Investors are "rightfully wary" about the trajectory of digital advertising growth in 2022, especially into Q2 earnings, Sandler tells investors in a research note. The analyst believes a "perfect storm" is here given the step-down in spend and conversions across the whole internet ecosystem in Q2, an "ascending trajectory" from new challengers like TikTok and Apple, and the "obvious tough comps which are well documented." He thinks this "cocktail of events is likely to generate the lowest growth rates for the sector in years." However, stock valuations already reflect some of this, contends Sandler.
JMP Securities analyst Andrew Boone lowered the firm's price target on Snap to $42 from $45 and reiterated an Outperform rating on the shares as part of a broader research note on Internet & Digital Media. The analyst cited the deteriorating macro backdrop of high inflation, ongoing supply chain issues, rising interest rates, and worsening business and consumer confidence. Boone expects the digital advertising growth to have slowed through Q2 and now projects 11% growth for global digital advertising in 2022 before a rebound arrives in 2023.