Facebook can breathe a sigh of relief — for now.
The social media behemoth scored a huge win Monday afternoon when a federal judge dismissed a Federal Trade Commission antitrust complaint.
The news sent Facebook stock surging more than 4%, and its market cap passed and closed above $1 trillion for the first time ever. Facebook stock’s reaction Monday afternoon was a clear signal that the only thing really holding investors back is regulatory pressure.
The original lawsuit, which was filed in December, sought to break up Facebook and would have required the company to divest Instagram and WhatsApp. The court found the FTC’s complaint lacked sufficient proof that Facebook was operating as a monopoly. Because the court only dismissed the complaint and not the entire case, though, the FTC could very well present an amended complaint.
CEO Mark Zuckerberg has acknowledged the company has a lot of work to do to address overwhelming concerns regarding privacy and misinformation. But despite significant challenges over the past several years, Facebook has proved its resilience.
It's hard to argue that Facebook hasn't been a good company to invest in over the years. Almost all of the company’s revenue is generated through advertising, and despite minor setbacks in growth due to COVID, ad revenue is back well above pre-pandemic levels.
Not to mention the monster run the stock has been on. Facebook shares climbed more than 60% over the past 12 months and more than 212% over the past five years. Since Facebook’s IPO in May 2012, the stock was up a staggering 836%.
The regulatory overhang has been the most substantial argument in the bear case for Facebook. And truth be told, if Facebook were ever to be broken up, there really is no telling what would happen and how bad the impact could be for investors and the overall market.
Yes, Big Tech’s dominance is worrisome. But also without Facebook, Amazon, Alphabet, Apple and Microsoft, the markets wouldn’t be at the record-high levels they are now — a market in which a lot of people made a lot of money. Whichever way the regulatory pendulum swings, the impact will likely be far-reaching.
All in all, it was a symbolic day for Facebook, and while this isn't exactly an all-clear for the platform, it does at least buy more time.
The FTC’s antitrust lawsuit isn’t the only major regulatory hurdle with which Facebook is dealing. Just last week, the House Judiciary Committee approved a package of bills attempting to weaken the Big Tech companies and target their alleged anti-competitive practices. The bills were the most comprehensive effort by lawmakers on both sides to create a set of rules as they try to regulate the tech giants.
In addition, it was recently reported that Republicans were exploring the idea of slapping Big Tech with taxes. The idea from GOP FCC commissioner Brendan Carr would make Big Tech giants pay taxes that would ultimately fund broadband subsidy programs.
The target on Facebook’s back remains as large as ever, and perhaps it could even be argued that Facebook’s milestone of crossing $1 trillion in market value could actually intensify scrutiny on the company.