Meta shares drop 6% after US jury verdicts on youth safety

Shares of Meta Platforms, Inc. tumbled 6% to a 10-month low on Thursday following a series of legal setbacks in the United States. Recent jury verdicts have raised significant concerns regarding the company's liability for failing to adequately protect or warn young users about the risks associated with its social media platforms. These developments have sparked fears of multi-billion dollar fines and a surge in follow-on litigation. In the first two trials stemming from a massive wave of lawsuits targeting social media companies, jurors found Meta liable for harms caused to children. A jury in Los Angeles recently held both Meta and Alphabet Inc. responsible for a young woman's clinical depression, which was linked to an alleged addiction to Instagram and YouTube. The court awarded $6 million in damages in that case. Separately, a jury in New Mexico ordered Meta to pay $375 million for misleading users about platform safety and facilitating the exploitation of children. These legal challenges come at a time when the tech sector is already grappling with high capital expenditure for artificial intelligence and intense competition from rivals like TikTok. > The verdicts add a new layer of risk on top of existing concerns about AI capex intensity, competitive pressure from TikTok and others, and the durability of ad growth, so they act as a catalyst for some profit-taking rather than the sole cause, said Adam Sarhan, chief executive of 50 Park Investments. While Snap Inc. and TikTok were also defendants in the California trial, both companies reached settlements with the plaintiff before the proceedings began. However, the broader legal landscape remains perilous for the industry. Meta, Alphabet, Snap, and ByteDance are currently facing thousands of lawsuits alleging that their platforms have negatively impacted the mental health of teenagers. More than 2,400 cases have been centralized before a single federal judge in California, while thousands of cases are consolidated in California state court. Legal experts suggest that the financial and reputational stakes are particularly high for smaller players in the market. > For Snap, which is a much smaller company, I think this just increases the stakes for them if they have many more cases to come, said Glenn Cohen, a professor at Harvard Law School. Market reaction was swift following the news. Shares of Snap dropped approximately 6%, while Alphabet saw a decline of 2.2%. Analysts in India and other global hubs are monitoring the situation closely as the potential for a precedent-setting appeals process looms, which could challenge long-standing legal protections for technology firms.