Breakingviews: Facebook follows blue-chip playbook of buybacks to make up for stumbles

Published Tue, Nov 22 20164:12 PM EST

Breakingviews

Jennifer Saba

Facebook is employing a decidedly old-school tactic to a series of disruptive missteps. The $340 billion social network is launching a $6 billion stock buyback, its first ever. Meanwhile it's wrestling with more advertising-metric flubs, a fake-news problem and slowing revenue growth. Money isn't a problem for Facebook, though the timing is curious. Shares of Mark Zuckerberg's dorm-room creation are down about 9 percent over the month, mostly after Facebook warned earlier that stellar ad revenue growth, which makes up the bulk of its top line, will not continue at its blistering pace. Even so, the company is not trading too far from its all-time high of around $130, which it hit in October. More from Breakingviews : Credit markets ill-prepared for Trump presidency The social network can easily cover the amount it is spending to repurchase shares of common stock, starting next year, with more than enough left over to increase its research and development budget. As of Sept. 30, it had about $26 billion in cash and short-term investments on hand, according to Thomson Reuters' data. All the same, the company has been in the cross hairs recently. In a bid to be more transparent in response to miscounting how much time viewers spend watching videos, it revealed even more blunders. True, some worked out in favor of advertisers and publishers, but it underscored the need for serious third-party verification. Thornier still is how Facebook is dealing with the plague of fake news on its pages, especially in the wake of a surprising U.S. presidential election that some have attributed to the deliberate spread of misinformation. Last week, Zuckerberg laid out for a second time the way the company is trying to handle its role in spreading falsehoods. Buybacks are usually the stuff of older, more established businesses that tout the financial maneuver with great fanfare – often because they have little else to offer investors. It's not uncommon for Silicon Valley to embrace them. Alphabet did last year. But Facebook's desire to give more money back to shareholders at a time when things are moving fast, and breaking, all around it has an air of maturity to it that may signal peak status has been reached. For more independent commentary and analysis from Reuters Breakingviews, visit breakingviews.com

Mark Zuckerberg, chief executive officer of Facebook Inc.

David Paul Morris | Bloomberg | Getty Images

Shares of Mark Zuckerberg's dorm-room creation are down about 9 percent over the month, mostly after Facebook warned earlier that stellar ad revenue growth, which makes up the bulk of its top line, will not continue at its blistering pace. Even so, the company is not trading too far from its all-time high of around $130, which it hit in October.