March 26 - Meta Platforms Inc. shares fell about 6% on Thursday, closing at a 10-month low, after juries in two early U.S. trials concluded the company did not do enough to warn or protect younger users of its services. The outcomes have raised concerns among investors about the prospect of substantial penalties from additional cases and potential follow-on suits.
In the first of the trials, a Los Angeles jury found Meta and Google liable for a young woman’s depression that was linked by the plaintiff to alleged addiction to Instagram and YouTube, and awarded $6 million in damages. Separately, in New Mexico, jurors ordered Meta to pay $375 million after finding the company had misled users about safety on its platforms for children and had allowed their exploitation.
These verdicts represent the opening decisions in a wave of U.S. litigation that accuses major social media companies of causing harm to children and young users. Legal observers say the results could precipitate an appeals process that challenges long-standing legal protections afforded to tech firms.
Market participants noted the rulings add to an already complex set of headwinds for the company. Adam Sarhan, chief executive of 50 Park Investments, said the jury decisions create an additional layer of risk on top of concerns such as capital spending tied to artificial intelligence projects, competitive pressure from rivals such as TikTok, and uncertainty about the sustainability of advertising revenue growth - factors that may prompt some investors to take profits rather than identifying the verdicts as the sole cause of selling pressure.
Snap and TikTok were also named as defendants in the California trial, although both companies reached settlements with the plaintiff before the trial commenced. Legal experts noted the stakes are particularly high for smaller firms if they face similarly large volumes of cases going forward.
Glenn Cohen, a professor at Harvard Law School, observed that for Snap - a smaller company by market size - the emergence of many more cases would amplify the company’s exposure. Following the verdicts, Snap’s shares fell by roughly 6%, while Alphabet Inc., the parent of Google, was down about 2.2%.
Across the litigation landscape, Meta, Google, Snap and ByteDance - the parent company of TikTok - are contending with thousands of lawsuits that allege their platforms have damaged the mental health of teenagers and young people. More than 2,400 such cases have been centralized before a single federal judge in California, and additional thousands are consolidated in California state court.
Context from market commentary - Some investor tools and services that screen stocks have used the recent moves to reassess risk-reward profiles across technology names. One screening service described its approach to evaluating companies like Alphabet by leveraging a range of financial metrics and historical performance examples, noting prior successful picks such as Super Micro Computer (+185%) and AppLovin (+157%).