Meta Heads to Court & Reddit’s Rise to the S&P 500

**SPEAKER_1** (0:00)
This episode is brought to you by Charles Schwab. Timing the market, fighting inflation, managing risk? Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help.
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**Ann Berry** (0:32)
A Hollywood showdown, Paramount wants the states fighting its Warner Brothers deal to foot the bill. We have the latest.
L3Harris, a sudden CEO departure sends shares sliding. But do we know what really happened? And Meta, heading to court in a landmark battle over kids and social media. We break it all down. For Monday, August 17th, our 250th episode, it's Brew Markets Daily and I'm Ann Berry.
More market details to come, but first, Meta, facing a landmark legal battle over children and use of social media as it heads to a California federal courthouse this week. Attorneys General from 29 states accused the company of deliberately designing social media apps to keep young users hooked. While at the same time misleading parents and the public about the risks. That's a unified case brought against Meta in 2023
And now starting tomorrow, four states, California, Colorado, Kentucky and New Jersey, are taking their claims to trial. The states alleged that Meta knowingly built features designed to encourage vulnerable young users to keep scrolling, watching and coming back. All in the name of engagement and as a result, the profits that drives. Well, the states also accused Meta of illegally collecting personal information from children under the age of 13 without parental consent. Meta strongly denies the allegations, arguing that the states are exaggerating the connection between social media and a youth mental health crisis. And the company also says it has spent years developing safeguards to protect young people online. But in what's being coined Meta's quote, big tobacco moment, states have already scored victories against Meta on similar child safety claims.
Earlier this year, New Mexico became the first state to win a trial against a major technology company over alleged harms to young people, prompting $375 million in civil penalties. A judge later ordered an additional $567 million in remedies, bringing Meta's total liability, in that case, loan, to nearly $950 million, along with significant changes required to how Facebook and Instagram operate for young users, all of which Meta is appealing. Well, now again, investors are looking to size up liability risk. And that's as opening arguments for the new trial begin tomorrow. The jury was seated last week in Oakland's federal courthouse. And the financial stakes in this much larger federal case could be enormous. Meta says the state's calculation of potential damages could expose the company to as much as $1.4 trillion, a figure just shy of the company's entire current market cap. But even a fraction of that sum risks Meta's place in the AI race. It's in the throes of an up to $145 billion cap expiry this year alone. Now, lawyers representing the states have said that $200 billion is a more likely amount for damages. And although that's not as catastrophic for Meta as $1.4 trillion, it's a number that still makes the company's roughly $90 billion in cash and equivalents as of the latest quarterly disclosure, insignificant by comparison.
Well, more than the money, on the line today, the states are also seeking sweeping changes to Meta's apps that includes age restrictions and end to infinite scrolling for young users and changes to algorithms that have been built using children's data. Well, the Meta CEO, of course, Mark Zuckerberg and Instagram chief Adam Mosseri are expected to testify during this trial, which could last seven weeks. And the case could, of course, reach far beyond Meta, with stock ticked down round about 4% today. YouTube, TikTok could be on the hook next. Plus, of course, Snap shares there down over 3%. We're going to keep on watching. We're coming up in a moment, a spin through the headlines that are moving the markets today, including a surprise leadership shakeup at L3Harris and OpenAI making another push into shopping.
But first, this episode is brought to you by Charles Schwab.

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Could recency bias be skewing your potential stock picks? Do you feel attribution bias might be messing your retirement plan? Sometimes overconfidence ends up overestimating our own abilities. Or loss aversion kicks in and losing that dollar hurts way more than gaining one. Financial Decoder, an original podcast from Charles Schwab, explains how these cognitive and emotional biases can affect the decisions you make about your financial life.

**Ann Berry** (4:59)