Facebook Inc. (NASDAQ: FB) shares already have underperformed other mega-cap tech stocks this year. A run-up of 35% in 2020 should be impressive. However, shares of Apple, Amazon and Microsoft are up much more. Now, a potential breakup of Facebook, forced by the government, threatens to drive its stock down, and with it the fortune of one of the world’s richest persons, founder and CEO Mark Zuckerberg.
The antitrust complaint has been brought by 46 states, the District of Columbia and Guam. The charge is that Facebook’s buyout of Instagram in 2012 and WhatsApp for $19 billion drained the market of competition. If those operations became independent of Facebook, competition in the social media business would change and Facebook’s dominance of the online advertising market (which its shares will Google) would lessen.
Facebook has an advantage that similar cases have not been successful since the AT&T breakup that was mandated by a federal court in 1982.
Facebook’s current market cap is $790 billion, the fifth-highest of all American companies. According to the Bloomberg Billionaire Index, Zuckerberg has a net worth of $104 billion. He stands to lose much of that if the government prevails.
Because Facebook does not detail the financial results of Instagram and WhatsApp, it is hard to pinpoint how much Facebook’s revenue would fall. In the third quarter, revenue was $21.5 billion, up 22% from the previous year. Per-share earnings rose 28% to $2.71. Daily active users increased by 12% in September from the year-ago period to 1.82 billion.
How much would Facebook’s shares fall due to a breakup? Although no one can tell for certain, its revenue growth might halt. A hit to that growth would take Facebook off the list of America’s dominant mega-cap stocks. A drop of a third would cost Zuckerberg $30 billion.
A reduction of $30 billion would harm Zuckerberg’s place on the billionaire list. Yet, with $70 billion left, from a practical standpoint, it would not matter much.
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