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FTC's Look Into Facebook A 'Negative Development,' Says RBC's Mahaney

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FTC's Look Into Facebook A 'Negative Development,' Says RBC's Mahaney

The Federal Trade Commission potential move to block Facebook, Inc. (NASDAQ: FB) from combining its multiple apps into one is a "negative development" for the social media company, according to RBC Capital Markets' Mark Mahaney.

Facebook Breakup Unlikely, Analyst Says 

Facebook is seeking to combine WhatsApp, Instagram, Messenger and Facebook so that users can send messages from one app to another.

The logic behind the move is to monetize the WhatsApp messaging platform which Facebook acquired for $19 billion in early 2014 and which generates zero revenue to this day, Mahaney said on CNBC's "Squawk Box" Friday.

The FTC's investigation could lead to  a forced breakup of Facebook into different companies, the analyst said, adding that the general sentiment among analysts is that the likelihood of a breakup is "slim."

Similarly, the chances of Facebook being forced to unwind acquisitions it made years ago is just as "slim," he said. 

Facebook is unlikely to voluntarily spin its assets into new companies, as the apps generate a "fair amount" of synergies, Mahaney said. 

The Read-Through From The FTC Investigation

The broader takeaway from the FTC's investigation into Facebook is that the regulatory body could do the same with other tech giants, the RBC analyst said.

Tech companies could now feel undue pressure to forgo any new, large-scale mergers, he said. 

Fitbit Deal Under Review 

Even smaller acquisitions could face some scrutiny from regulatory bodies, Mahaney said.

One example: Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s acquisition of Fitbit, which is under review.

"It almost seems like there will be a chilling impact on almost all acquisitions, but especially anything sizable — $10 billion or above," he said.

Facebook shares were trading down 1.39% at $194.01 at the time of publication. 

Related Links:

Analyst Names Facebook, Twitter Top Online Media Stock Picks For 2020

Piper Jaffray Bullish On Facebook, Says Negative Headlines And Regulatory Challenges Priced In

Photo from Pixabay

Latest Ratings for FB

DateFirmActionFromTo
Jan 2020MaintainsOutperform
Jan 2020MaintainsOverweight
Jan 2020MaintainsBuy

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