Why Facebook’s stock jumped despite facing a record-breaking $5 billion FTC penalty: ‘A slap on the wrist’ (FB)
Facebook’s stock rose around 1% after news broke that it is facing a record-breaking $1 billion penalty from the Federal Trade Commission.
Investors are breathing a collective sigh of relief that the settlement isn’t more serious.
Why? Facebook is absolutely vast, and makes three times the penalty in revenue every quarter.
Critics of the company have immediately accused the FTC’s decision of being inadequate.
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The Federal Trade Commission is gearing up to hit Facebook with a staggering, record-breaking $5 billion penalty.
Wall Street is viewing this as a good thing.
And the reason why speaks volumes about the sheer scale and power of Facebook today.
Some background: For the last year, the FTC has been investigating Facebook’s various privacy snafus. The agency started with a probe into whether Cambridge Analytica’s misappropriation of 87 million users’ data amounted to a breach of the company’s 2012 consent decree with it. It later expanded the inquiry to incorporate the California tech giant’s myriad other recent privacy scandals.
This process is now drawing to a close. According to multiple reports, the commission has agreed to a settlement that would include a fine of roughly $5 billion.
Read this: The FTC has approved a roughly $5 billion settlement with Facebook
That amount is extraordinarily large. It’s an order of magnitude bigger than the previous record penalty imposed by the agency — the $22.5 million fine it levied against Google in 2012. But when the news broke on Friday, Facebook stock actually rose, trading up around 1%.
This is likely because, despite the penalty’s unprecedented size, it’s still just a drop in the ocean compared to the gigantic amount of cash Facebook regularly produces. The company makes billions of dollars in profit and generates three times the total settlement amount in revenue …read more
Source:: Business Insider