The company's agreement with state officials removes a cloud that was hanging over the stock, an analyst says
A lawsuit accused Meta of designing Facebook and Instagram in ways that would "entice" younger users.
Shares of Meta Platforms have been choppy on Wednesday as Wall Street assesses the implications of the company's settlement in a closely watched legal battle over child safety.
The settlement came during the second week of a California federal trial over claims brought by a coalition of states that accused Meta (META) of designing Facebook and Instagram to "entice, engage and ultimately ensnare" children. Meta was also accused of misleading the public over the safety of its platforms and improperly collecting the personal data of children who used its services.
Meta said in a post that the agreement involves a payment of about $18 billion. A court filing had listed the payment amount at $16.68 billion.
The trial has been seen as a cloud over Meta's stock. Evercore ISI analyst Mark Mahaney wrote Wednesday that the settlement could be a catalyst for shares, which have been "materially dislocated" due to regulatory concerns and fears about artificial-intelligence spending levels.
Wednesday's development "significantly addresses" the overhang of youth-safety lawsuits over Meta's stock, Mahaney wrote in a note. "The risk and the issue may not be fully resolved, but it appears to be largely resolved."
As a result, "we have a stock opportunity that we believe is highly compelling," Mahaney added.
Meta shares were up as much as 4.1% earlier Wednesday, before reversing lower and then clawing back into positive territory. They were recently up about 1%.
The agreement with the state coalition came just a few months after Meta was ordered to pay nearly $1 billion in a New Mexico state court ruling that required the company to put limits on how young people use its platforms.
"Today, we have secured a settlement with Meta that will make social media less dangerous for our kids and make a world of a difference for children and their families," California Attorney General Rob Bonta said in a statement.
Bonta said that Meta "has agreed to make massive transformations that will reduce the risk of harm from its platforms - and will do it within months."
In a blog post, Meta said that teens will face a two-hour time limit cumulatively across Facebook and Instagram, and that they will only be able to turn that off with the permission of their parents. The apps will also be blocked by default from midnight to 6 a.m., and notifications will be muted by default from 8 a.m. to 3 p.m.
Meta didn't respond to MarketWatch's request for comment.
-William Gavin -Christine Ji