Meta shares rose 2.1% as investors reacted to the company’s major legal settlement

Meta Platforms (NASDAQ: META) is surging on Wednesday as investors are reacting to a new legal settlement as a major cut to the company’s risk.

META was up 2.1% at press time after a wild session. Shares jumped more than 4% soon after the opening bell, then reversed and fell 1.4%, before moving back into positive territory during afternoon trading. Jim Cramer called the agreement a “big win” and said the stock was not fully reflecting what Meta gained from ending the case.

The settlement ends a huge federal lawsuit in California that involves several states, such as California, Colorado, Kentucky, and New Jersey.

In this case, Meta was charged with developing the Facebook and Instagram features that engaged children in a destructive manner, which led to their mental illnesses.

There were also families of children and young adults who committed suicide due to their troubled social media usage and had brought lawsuits, claiming that the platform’s security was responsible for the negative impact on them. Jim claimed that Meta could have been fined up to $200 billion and spent many years fighting in court cases.

Meta accepts child-safety limits as Oregon secures $125 million

Oregon will be getting $125 million in settlement money. According to Oregon State’s Attorney General Dan Rayfield, Meta should include enforceable protections as part of their products, with the ability to independently verify that these changes have been made.

“Children are not a business model. For far too long, Meta placed profits above the health and welfare of the children on their platforms and Oregon families have suffered,” said Dan.

Dan also said, “This settlement changes that – not just with a record payment, but with real, independently verified changes to how these platforms work for kids.”

His office called the agreement “one of the largest state consumer protection settlements in U.S. history,” comparing its size with the 1999 tobacco settlement.

Moreover, it also resolves yet another issue that involved Facebook users’ information. As mentioned by Oregon, this issue concerns the allegations that Meta had improperly shared the private information of its users with third parties, including a political consultancy company called Cambridge Analytica, before the 2016 US elections.

Jim said traders were reading the news incorrectly. “Somehow the narrative has turned to say that it was not good for Meta. That’s insane,” he said during the Investing Club’s Morning Meeting.

Jim called the temporary 1.4% decline “ridiculous” and described the market response as an “incorrect read,” arguing that META shares should be trading much higher after the company removed the risk of a far larger penalty and prolonged litigation.

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