Is the EU Trying to Bring Down FB Stock?
According to the European Commission (EC), Facebook Inc (NASDAQ:FB) misled regulators during the company’s takeover of WhatsApp Inc.
However, the European Union’s (EU) eagerness to take down tech companies has some analysts worried about the future of FB stock.
Apparently, Facebook claimed it could not reliably match user accounts between WhatsApp and its marquee service. This was in 2014, at the height of the merger. But then, two years later, the company began to combine user data in ways it said was impossible.
EU officials claim this is evidence that Facebook gave “incorrect or misleading information” to antitrust authorities. The implication is that Facebook concealed its own market power in order to ensure a smooth acquisition. (Source: “EU Accuses Facebook of Giving Misleading Information on WhatsApp Purchase,” The Wall Street Journal, December 20, 2016.)
For this error, the EU wants to fine Facebook one percent of its global revenues or, to put it in dollar terms, $179.0 million. These accusations weren’t simply “hinted at” or “off the cuff;” they were written in a formal statement of objections.
Analysts are worried that the charges will add to Facebook stock’s growing list of concerns. There were already several headwinds for FB stock, including faulty ad metrics and a scandal about fake news. But other analysts note that Facebook’s upcoming battle with the EU puts it in good company.
Not only has the EU levied fines against Apple Inc. (NASDAQ:AAPL) for its tax strategy, but it also targeted Alphabet Inc (NASDAQ:GOOG) on antitrust charges.
Both cases required some mental gymnastics in order to arrive at their conclusions, suggesting that the EU is going out of its way to rein in the expanding power of American tech companies.
As one of Silicon Valley’s most prominent alumni, Facebook was bound to land in the EU’s crosshairs sooner or later. Here’s what the firm said in response to the allegations:
“We’ve consistently provided accurate information about our technical capabilities and plans,” said a Facebook spokesperson. “We respect the commission’s process and are confident that a full review of the facts will confirm Facebook has acted in good faith.”
To be clear: the EU has not made a charge like this in a dozen years. It is highly unusual.
That being said, the EC failed to bring down Apple stock and Google stock, so there’s every reason to believe they will fail at bringing down FB stock. In the end, the luddites will simply have to learn that no one can stop the forward march of history.