Facebook bulls need to watch out for European regulators

Key Points
  • EU regulators have lifted about four days of profit from Facebook's coffers just this month.
  • In the past week, regulators across the continent have imposed fines worth about 4 cents a share.
  • Now the UK's Conservative Party is looking at its own Internet levy .
European Commissioner Margrethe Vestager gestures during a news conference on Ireland's tax dealings with Apple Inc at the European Commission in Brussels, Belgium August 30, 2016.
Eric Vidal | Reuters

momentum traders may want to remember the name Margrethe Vestager when they start making bets on the company's second quarter results.

That's because Vestager, the European Commissioner who oversees competition, just lifted a few cents per share from the company's investors in the form of a $122 million fine. The fine came after the EU found Facebook had shared data on WhatsApp users, after telling the EU in 2014 that it didn't have that ability.

$122 million isn't a fortune for Facebook, which earned $3 billion in net income in this year's first quarter -- a profit of roughly $34 million per day. At that rate, Facebook's 19,000 global employees will work about three-and-a-half days this quarter to pay Vestager's fine.

But these sorts of fines and taxes have become the cost of business on a continent better known for regulation than the type of entrepreneurship that creates companies like Facebook and its chief online ad rival, Alphabet's unit.

Facebook takes a $122 million hit for giving EU regulators misleading information about WhatsApp
Facebook takes a $122 million hit for giving EU regulators misleading information about WhatsApp

Lucky for Facebook bulls, the company cooperated --- or the damage could have been worse.

"The fine is lower than it would have been," had the company not come forward and taken the blame, said Vestager, who's made a name for herself by attacking the business and privacy practices of giant U.S. Internet firms.

The fine came the same week that Italian and French authorities levied their own fines related to sharing consumer data, that added up to close to $4 million.

Taken together, these bills add up to about 4 cents a share.

And more costs for doing business in Europe may be on the way.

Belgium and the Netherlands in the past week also released a statement that criticized how Facebook tracks users for advertising purposes.

On Thursday, the UK's Conservative Party, which is preparing for a general election early next month, released its latest political statement, which proposed a levy on Internet firms to help fund efforts to reduce online abuse, according to the Financial Times.

Granted, the tax may never be enacted, and will likely be a relatively small amount by itself. Yet investors should be clear that the regulatory environment in Europe seems to be turning against Facebook. When betting on how Facebook will fare versus Wall Street expectations, they may want to add an expense line named for Vestager and her colleagues.

Facebook is seen posting a profit of 78 cents a share for the period ending in June.