Meta Platforms (NASDAQ: META) rose 0.2% overnight heading into Wednesday after reports emerged that the company and state attorneys general discussed settling a landmark trial over social media addiction among children and teenagers.
The lawsuit, filed by attorneys general representing 29 states, accuses Meta of knowingly designing features that encouraged compulsive use among young people while misleading users about platform safety.
States also allege that Meta collected data from children under the age of 13 in violation of federal privacy law, compounding the legal exposure the company now faces.
Meta has denied all allegations and accused the states of demanding unreasonable platform changes and what it called an “outlandish payout.”
The potential financial stakes are staggering, with Meta’s own calculations suggesting an adverse ruling could cost as much as $1.4 trillion, a figure that nearly matches the company’s entire market value.
Future Fund Managing Director Gary Black argued that even a multibillion-dollar settlement could benefit Meta shareholders by converting an open-ended legal threat into a defined, one-time cost.
“Investors would treat it as a one-time non-recurring event,” Black said on X, describing a settlement as “positive” for META stock even if it carries a price tag of several billion dollars.
Black’s comments represent a notable shift from his earlier warning this week that the ongoing trial would likely weigh on Meta stock until the advisory jury delivers its verdict, currently expected in October.
He had previously compared the litigation to the tobacco lawsuits of the 1990s and cautioned investors about the possibility of a “trillion dollar initial judgment” followed by a difficult appeals process through the Ninth Circuit Court of Appeals.
U.S. District Judge Yvonne Gonzalez Rogers will ultimately determine liability, penalties, and remedies, regardless of what the advisory jury recommends.
Black acknowledged that even a favorable settlement would not end Meta’s broader legal troubles, warning that “other litigation will surely follow” any agreement reached in the Oakland federal court proceedings.
Instagram chief Adam Mosseri has already testified during the trial, and attorneys expect Meta CEO Mark Zuckerberg to take the stand as proceedings continue.
Meta and its peers are simultaneously facing more than 3,000 personal-injury claims from U.S. families and individuals, along with 1,300 lawsuits filed by public-school districts across the country.
The legal pressure on Meta has intensified following two recent courtroom setbacks, including a California social media harm case that resulted in a $6 million award against Meta and Alphabet’s YouTube, and a separate New Mexico ruling ordering Meta to pay more than $940 million.
Retail sentiment on Stocktwits flipped to “bearish” from “bullish” levels seen a week prior, accompanied by a 62% decline in 24-hour message volumes, reflecting divided opinion on how a settlement might affect share performance.
META stock has declined 24% over the past year, though shares climbed 2% on Tuesday and are up 2% for the month of August.
