May 11, 2012
FTC Investigates Facebook Just Days Ahead Of IPO
With Facebook´s scheduled IPO just eight days away, the Federal Trade Commission (FTC) is looking into the social network´s $1 billion acquisition of Instagram. The FTC is investigating the purchase for possible antitrust issues.
Three-hundred million in cash was exchanged for the photo-sharing app, as well as 23 million shares of Facebook common stock, and after the IPO, one can only guess how much that might be worth ultimately, writes Jolie O´Dell for Venture Beat.
The FTC must investigate business mergers valued at more than $66 million and preliminary reviews by the agency are common. But the investigation of Facebook for any competition issues could upset its plans to close the deal by the end of the second quarter.
Maxwell Blecher, an antitrust attorney with Blecher & Collins, said an antitrust probe would likely take at least a month. “If they go into it further and they issue additional requests for information, that could probably take up to six months,” he told Cameron Scott of IDG News Service.
A delay of that many months could hurt Facebook´s efforts to strengthen its mobile strategy. Cited in regulatory filings, Facebook has said that its revenue will suffer as users increasingly access its service from mobile devices rather than traditional desktops.
“The increase in mobile usage has resulted in its daily user base expanding more quickly than the number of advertisements it delivers,” Facebook said in amended S-1 filing with the Securities and Exchange Commission (SEC) Wednesday.
“If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected,” the filing states.
Competition analysts believe the Facebook´s purchase of Instagram will ultimately be approved. Special attention will be given to the takeover because of the high price Facebook paid for the app, which has yet to generate any revenues, reports The Telegraph.
“They´re going to want to take some months to investigate and understand the market and other players,” Mark Lemley, a professor at Stanford Law School, told The Financial Times. “And there may be more parties with an interest in submitting information.”