Is Facebook Heading For A Split?

Summary

  • The US Federal Trade Commission and a 46-member bipartisan group of states and districts has filed antitrust lawsuits against Facebook Inc (NASDAQ: FCBK, FCBK:US) which seek to split the social media company.
  • The antitrust lawsuit accuses the Silicon Valley giant of misusing its monopoly powers as a dominant player in the social networking landscape to quash competition and smaller businesses.
  • Zuckerberg bought image-sharing app Instagram in 2012 in US$ 715-million deal, and messaging service platform WhatsApp for US$ 22 billion a couple of years later.
  • Stocks of Facebook Inc, which jumped over 35 per cent this year, slumped about two per cent between Wednesday and Thursday.

 

Mark Zuckerberg’s Facebook Inc (NASDAQ: FCBK, FCBK:US) seems to be in hot water with the Federal Trade Commission (FTC) in the United States.

The FTC and a 46-member bipartisan group of states and districts, on Wednesday, December 9, filed antitrust lawsuits against Facebook, which seek to split the social media company. In other words, the FTC and the coalition group wants Facebook to divest of its acquired businesses of Instagram and WhatsApp.

The antitrust lawsuit accuses the Silicon Valley giant of misusing its monopoly powers as a dominant player in the social networking landscape to quash competition and smaller businesses.

 

What happens if Facebook divests its businesses of Instagram & WhatsApp?


Zuckerberg acquired the image-sharing app Instagram in 2012 for US$ 715-million deal. A couple of years later, Facebook acquired messaging service platform WhatsApp for about US$ 22 billion.

© Kalkine Group 2020

 

The FTC commission, in its latest complaint, attacked Facebook for “anticompetitive behavior”, saying that the company made these deals to “squelch” threats from competitors and smaller companies.

Facebook generates a huge chunk of its revenue from Instagram. And WhatsApp is where the tech giant is spinning its digital commerce business. Hence, it is safe to say that having to give up these two platforms would hamper Zuckerberg’s empire to a great extent. The company is also planning to launch its cryptocurrency - Libra blockchain - in 2021.

Stocks of Facebook Inc, which jumped over 35 per cent this year, slumped about two per cent between Wednesday and Thursday.

 

So, is Facebook splitting up?


The short answer is, we don’t know that yet. The result of the FTC antitrust lawsuits is yet to be released and until it does, Facebook Inc’s future is unknown.

However, it should be kept in mind that Facebook did not make its acquisitions in the vacuum. When it had proposed its deals to acquire Instagram and WhatsApp, the FTC had greenlit them. The company could now use these approvals in its defense against the lawsuits.

Facebook came under much scrutiny in the last couple of years following the acquisitions, especially when the FTC launched a fresh probe into accusations of antitrust violations last year.

Around October this year, the United States Justice Department set in motion lawsuits against Facebook and three other tech giants, including Google, Apple Inc, and Amazon Inc for abusing their weight to disrupt competition.


Disclaimer
The website https://kalkinemedia.com/ca is a service of Kalkine Media Incorporated (Kalkine Media), Business Number: 720744275BC0001. The principal purpose of the content on the website is to provide factual information only and does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform. In providing you with the content on this website, we have not considered your objectives, financial situation or needs. You should make your own enquiries and obtain your own independent advice prior to making any financial decisions.
Some of the images that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed on this website unless stated otherwise. The images that may be used on this website are taken from various sources on the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image. The information provided on the website is in good faith, however Kalkine Media does not make any representation or warranty regarding the content, accuracy, or use of the content on the website.
   
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK