China impact! Meta Wager Scrapped at Brazil Money Manager on TikTok Competition

One of Brazil’s oldest independent asset managers said it closed a years-old wager on Meta Platforms Inc. in the first half of 2022, citing the impact of competition from video-sharing app TikTok.

“The competition for time became fiercer given TikTok’s incredible ability to retain user attention,” IP Capital Partners wrote in a note to clients this month announcing the move. “While the short-form video format has had more success among young people, we believe it has a universal appeal and will continue to penetrate older audiences around the world.”

IP Capital Partners, which was founded in 1988, had more than 4 billion reais ($777 million) in assets as of April, according to data from Brazil’s capital-markets association Anbima. The firm didn’t disclose the size of the Meta position in the note to clients, and it didn’t immediately respond to an emailed request for comment.

The money manager, which started building a long position in Meta in 2018, estimates that the US audience spent more time watching TikTok than Reels, the short video platform of Meta unit Instagram, by a magnitude of 20 in the first three months of the year. 

While Meta has focused on boosting the adoption of Reels, the effort diverts attention from highly monetized features on its Facebook platform, such as the feed and stories, which helps explain a sharp slowdown in revenue growth last year, the fund wrote. 

Wall Street has soured on Meta this year, with the stock losing more than half its value, erasing about $500 billion in market valuation. Much of the collapse occurred in February, when the company gave a forecast that disappointed investors and warned about competition from TikTok. Last year, it announced a pivot toward the metaverse, a change in strategy that investors remain mixed on.

The Rio de Janeiro-based asset manager’s oldest fund, IP Participacoes Master FIA BDR Nivel I, had exposure to Meta through both U.S.-listed shares and the company’s Brazilian depositary receipts, data compiled by Bloomberg show. Other U.S. bets include Netflix Inc., Charter Communications Inc., Charles Schwab Corp. and Amazon.com Inc., according to the note to clients.