Facebook (NASDAQ: FB) just took a significant blow to its perceived transparency and trustworthiness.
With issues regarding data privacy continuing to plague the company and shareholders calling for the company to split apart, one major index has chosen to remove Facebook’s stock from its list.
The S&P 500 ESG Index, also known as the S&P Ethics Index, removed $FB from a list of stocks known for their social responsibility.
The decision to remove $FB, which as made on Thursday, came in light of privacy concerns that lowered the social media giants overall score used to determine which stocks should be listed on the index.
While the company received a high score in environmental issues – 82 out of 100 – their social and governance scores were very low – 22 and 6 respectively. The S&P Ethics Index weighs those latter categories much more heavily with it comes to tech companies.
“The specific issues resulting in these scores had to do with various privacy concerns, including a lack of transparency as to why Facebook collects and shares certain user information,” said Reid Steadman, global head of ESG at S&P, in an official company blog post. “These events have created uncertainty about Facebook’s diligence regarding privacy protection, and the effectiveness of the company risk management processes and how the company enforces them. These issues caused the company to lag behind its peers in terms of ESG performance. As Facebook’s peers raise the bar in their ESG performance, Facebook will need to do even more to rejoin the ranks of the S&P 500 ESG Index.”
While Steadman added that the index remains quite fluid, suggesting that Facebook could make changes are get re-included onto the index, that seems unlikely to happen for a long time if at all.
Earlier in May, Facebook co founder Chris Hughes argued in an op-ed for The New York Times that Facebook should be broken up under antitrust laws. Specifically, he went on to say that Mark Zuckerberg held to much control over a number of platforms, including Facebook, Instagram, and WhatsApp.
Shares of Facebook didn’t move too much in response to the news development in after-hours trading on Thursday at the time of writing. However, it wouldn’t be surprising to see shares dip a little on Friday as markets react fully to the news.
Facebook Company Profile
Facebook is the world’s largest online social network, with more than 2 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos.
On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch.
The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktop.
Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada, and 25% from Europe. With gross margins above 80%, Facebook operates at a 40%-plus margin. – Warrior Trading News