Facebook could face a $5 billion fine resulting from an investigation by the Federal Trade Commission. The FTC has been looking into privacy violations by the social media giant. According to the online news and financial site Financial Metropole, Facebook set aside $3 billion as a contingency for the penalty.
Impact on Stock Price
There’s no word yet on how or if this will impact the way the platform interacts with users. The contingency slashed Facebook’s quarterly income despite a 25% revenue grew in the first three months of 2019. The FTC is investigating whether Facebook broke 2011 privacy promise to its users. The company’s stock price barely blipped at the news and rose 5% to $190.89 the day of the announcement, according to the Huffington Post.
This wasn’t the first time that Facebook’s founder Mark Zuckerberg has faced allegations of privacy violations. There have been quite a few high-profile accusations against the company in the past several years. Another relationship explored and questioned by authorities involved Facebook ties to Cambridge Analytica, which was given access to 87 million user profiles. None of the access came with user consent and it’s still unclear how the data was used by the firm. The media and users lashed out at the social media platform at the time of the violation in March 2018.
Financial Impact of the Latest Fine
Although $5 billion puts a dent into the earnings of any corporation, it’s likely the company has deep enough pockets to absorb the loss — eventually. For instance, Facebook reported a net income of $2.4 billion for the first quarter of 2019. That equates to $0.85 per share. This is more than 50% lower than the same time last year when the company reported a net income of nearly $5 billion, about $1.69 per share. The loss is attributed to the $3 billion put aside to deal with the FTC fine.
However, things are still looking rosy for the company overall. For example, its Q1 revenue grew by 26% to $15.08 billion year-over-year. Adjusting for the $3 billion, the company would have earned $1.89 per share.
Facebook User Impact
Users and prospective users seem unfazed by the FTC charges. As a matter of fact, the company’s monthly user base increased by 8% and now stands at 2.38 billion.
The proposed fine, which still hasn’t been approved yet by the Department of Justice, is the largest the FTC has recommended for any tech company. If passed, it may well set a precedent for future privacy law violations in cyberspace.
About the Author
Konstantinos Golias is a Fx trader, writer, and blogger. With 8+ years in finance market, he’s passionate about writing for stock market, real estate and new ways of investing. Konstantinos lives in Greece and writes about investing industry on his blog, financialmetropole.com
You can connect with him on Linkedin.