The board of directors of Facebook has authorized a share buyback of up to $6 billion, a move that might be able to placate investors especially after the issue of fake news on the social network broke out.
The fake news is said to have aided President-elect Donald Trump in his unexpected win over Hillary Clinton.
$6 Billion Facebook Stock Buyback Details
In a filing with the United States Securities and Exchange Commission, Facebook said that the specific timing and number of shares that the company will buy back will depend on several factors, including price, the conditions of the market and the general business, and the presence of alternative opportunities for investments.
The stock repurchase program will start in the first quarter of next year, with no fixed expiration date for the offer.
First Stock Buyback For Facebook
This is the first time that Facebook will be launching a stock buyback, a practice that is uncommon among companies in the technology industry.
Tech companies rarely return cash to their shareholders in the form of dividends or buybacks, as the general preference is to use the cash instead on growth opportunities. Facebook, however, said that the share repurchase will remain consistent with its capital allocation strategy of making long-term investments for growth as the priority.
The company's balance sheet reveals that Facebook has about $26 billion in cash and short-term securities.
Facebook warned investors earlier this month that the growth rates for the company's revenue is expected to decline over the coming quarters, as 2017 is seen as a year for aggressive investments. As such, its stock price decreased by more than 8 percent, which Facebook could take advantage of in the stock buyback.
Facebook Responds To Fake News Issue With Cash
The shares of Facebook saw an 11 percent decrease over the month of November, and is one of the many companies seeing the trend due to the uncertainties on the effect that Trump's election will have on Silicon Valley.
The more recent issue that Facebook is facing, however, is the allegations that the fake news articles that have run rampant on the social network aided in Trump's surprising victory in the presidential race.
According to Facebook CEO Mark Zuckerberg, such allegations are "crazy" and that the small amount of fake news on the platform is not enough to influence the election. Reports later revealed that Facebook had an update in place to fight against fake news on the service, but decided not to go through with it.
Will the stock buyback be able to appease angered investors over the fake news issue, along with Facebook's recent challenges? We will find out once the program begins early next year.
