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Facebook $6Bn Share Buyback Program - It's Questionable

The buzz in the investor community to analyst post Facebook announcement of $6Bn Share buyback program raises multiple queries. We all know that Facebook turned itself as formidable technology powerhouse. Facebook result indicates that their profitability is increasing but earning per share growth is muted. In 2019, Facebook common a floated share in the market was 2Bn and witnessed 45% growth of floating shares in 4 years. The unprecedented growth in floating share is because of employee stock option getting converted into share as well as Whatsapp buyout.

In Technology world cash is king as we don't know when a slight move will act as disastrous for any organization. We all should remember Sun Microsystems, Lucent Technology, Motorola, Nokia, Tell labs and many more as their slight misstep forced them to the brink.

All those companies distributed stock option lavishly to their employees during their pick and in order to meet analyst and street earning expectations; companies went for frantic share repurchase program. Look at Cisco Inc and check out their spending on share repurchase program.

Facebook in similar way wants to reduce the floating share so that their EPS goes high which will propel their share price which in turn again helps employees who received the stock price at higher prices to make profits.

As Facebook clearly stated that they may increase the amount with top up indicate that they do not want to make their intentions clear to stakeholders. One should get trapped by buying the share at higher price but should question them about their investment strategy.

Why can't they invest allocated money to 10 growing company which will bring in recurring revenue and profitability down the line? It’s not important that one need to buy only multi-billion $ company but may invest in potential oriented companies who are already buzzing the market.
At last its investor call but I differ with Facebook strategy

Disclaimer: Please consult your financial adviser before investing.

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About Devendra Prasad

20 years plus industry veteran of domestic and international ICT domain with the expertise in Business, Technology, Strategy and Analysis. Specializes in forecasting impact analysis, trends and recommendations for Investments, Technology and Regulations.
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