With the world largest asset manager, BlackRock ($6.32 tn), is increasing its holding in the Social Media giant, the world’s largest stock-picking fund stands out amongst other investors. Other funds managers have reduced or eliminated their position amidst controversy about the company’s data management. This position might reveal itself as an endorsement of Facebook by a major outside shareholder at a time when arise over stricter regulation.
Among the bears are Swiss Vontobel Asset Management ($40bn), Copper Rock Capital ($5bn) Janus Henderson Global Technology Fund ($2.65bn). Before concerns about privacy arose, Wall Street was extremely bullish; 90% of analysts gave Facebook a “buy” rating in early February with target prices centered around $195 a share. Wells Fargo’s AI Research Analyst, Aiera, stopped its sell recommendation after the news of the controversy, without a new rating taking its place. Those taking a short position before the news have totaled $4 billion on paper profits in the last two weeks of March.
Facebook shares remain down over 10% after reports regarding Cambridge Analytica, inappropriate access to user data came out. Recent research by Jefferies, using SimilarWeb's engagement data, has suggested that even after the scandal broke the number of daily active users has not meaningfully declined.
Keith Knutsson of Integrale Advisors commented, “The market overreacting to bad news is nothing new; if earning season kick off well and Facebook’s DAU continues to not be significantly affected, it can easily recover from this episode. Required investments in security might affect profitability going forward, but a $50bn drop in Market Value is steep.”