Meta Shares Under Pressure Following Critical Report

A new investigative report has cast a harsh light on Meta’s advertising practices, sending its shares lower and raising significant questions about its revenue priorities. The findings center on the company’s handling of advertisements from China, suggesting a potential conflict between profit motives and user safety.

The Core Allegations

The sell-off was triggered by a Reuters special report published on Monday, which cites internal company documents. The investigation alleges that Meta was aware of substantial risks from fraudulent advertisements originating in China but continued to derive significant revenue from them.

Key data points from the report include:

• Chinese advertisers reportedly contributed over $18 billion to Meta’s revenue in 2024, accounting for more than 10% of its global total.
• Internal estimates indicated that approximately 19% of this revenue—equating to more than $3 billion—was linked to ads associated with scams, illegal gambling, and other prohibited products.
• A specialized China anti-fraud team had successfully reduced the volume of problematic ads in early 2024. However, this stricter enforcement was reportedly halted following intervention from CEO Mark Zuckerberg and an internal shift in “Integrity Strategy.”
• Subsequently, the China-focused team was dissolved and restrictions on new Chinese advertising agencies were lifted, despite internal warnings of increasing harm to users globally.
• Internal communications reportedly noted that the revenue loss from aggressive fraud prevention was “too high,” leading to a shift toward softer measures.

The market’s reaction reflects deep concerns over potential regulatory fallout and reputational damage. The stock remains under pressure, closing at 551 euros in the latest session. This places it roughly 22% below its 52-week high, though still notably above the low marked in April.

A Dual Burden: Dividends and Scrutiny

Beyond the substantive allegations, a technical factor also weighed on the share price this week. Meta began trading ex-dividend on Monday, following an increase in its quarterly payout to $0.525 per share.

Shareholders on the register at Monday’s close will receive the payment later this month. While the theoretical dividend adjustment explains a minor portion of the price movement, the dominant driver is clearly the selling pressure ignited by the Reuters investigation.

Should investors sell immediately? Or is it worth buying Meta?

Highlighting a Strategic Vulnerability

The situation underscores Meta’s growing, yet complex, dependence on the Chinese advertising market. While its core platforms like Facebook and Instagram are blocked within China, businesses from the country heavily utilize Meta’s services to reach international customers.

The internal estimate that nearly $3 billion in revenue may be tied to “scam” advertising adds a serious political dimension. In the United States, senators including Josh Hawley and Richard Blumenthal have previously called for investigations into Meta’s ad practices. The newly published report, with its concrete financial figures, is likely to fuel further regulatory and political initiatives.

Simultaneously, the $18 billion figure from China highlights this market’s outsized role in Meta’s growth, comparable in scale to entire geographic regions. For management, this creates a tangible tension between pursuing growth, managing compliance costs, and upholding user protection.

Looking Ahead: Regulatory Risk and Financial Transparency

In the coming weeks, investor attention will likely focus on potential responses from U.S. authorities. Should the Reuters findings prompt a formal inquiry by bodies like the FTC or SEC, the issue of “scam ads from China” could evolve into a persistent overhang for the stock.

From a chart perspective, the price is currently testing support levels as the market digests both the dividend adjustment and the reputational concerns. Two immediate next steps will be crucial. First, whether Meta issues a detailed public response to the allegations, particularly regarding the reported dissolution of its China anti-fraud team. Second, how management addresses the sustainability of its Chinese advertising revenue during the upcoming fourth-quarter earnings report, as this revenue segment is now squarely in the spotlight for investors.