Investing.com -- Facebook slipped on Wednesday after the Wall Street Journal published a report connecting CEO Mark Zuckerberg to questionable privacy practices at the social media giant.
Facebook (NASDAQ:FB) fell 2% to $174.51.
The emails show that Zuckerberg raised questions about how the company was sharing data with third-party developers, suggesting he knew that the social media may be at risk of falling foul of privacy laws, the paper reported, citing sources. The increased microscope on Facebook, already under investigation by the Federal Trade Commission over its handling of user data, comes as the company warned that it is on the hook for a fine of up to $5 billion.
The potential impact of the mails has forced the company to opt for a quick settlement of its FTC investigation, according to the report.
The FTC is investigating whether Facebook's lax security measures violated a 2012 consent decree between the agency and Facebook that led to the Cambridge Analytica scandal where a British consulting firm had harvested the personal data of millions of people's Facebook profiles without their consent and used it for political advertising purposes. In the weeks that followed the scandal and after scrutiny from lawmakers on Capitol Hill, Zuckerberg vowed to ramp up spending on security to beef up protection of user data on the social media platform, fueling fears that rising costs would hurt margins.
Facebook's tangle with regulators is unlikely to end anytime soon as The Journal reported last week that the FTC is also investigating the tech giant’s practices on digital competition.
But some on Wall Street are downplaying the impact of a potential increase in regulatory overnight on the social media giant, claiming the threat has already been priced in.
"When we downgraded Facebook from Buy to Neutral in September 2018, we were primarily concerned about four core issues," said Moffett Nathanson, an independent research firm, who upgraded its rating on Facebook stock to buy from neutral.
"First, we were worried that the shift in monetization from News Feed to Stories would weigh on revenue growth. Second, we assumed operating costs would remain elevated as Facebook invested to clean up its platform, which would depress margins going forward. Third, we were concerned that the market was ignoring the increasing global regulatory risks. Finally, we held a longer-term concern that Facebook lacked a “third act” after Facebook and Instagram monetization. Now, less than a year later, each of our main concerns around the health of Facebook’s business has been addressed."
Despite today's slide, Facebook shares are up more than 33% this year. after falling 25.7% in 2018. Despite the recovery of the stock this year, it's still off 20% from its 52-week high of $218.62.© Reuters.