Facebook stocks reportedly fell 2.64 percent soon after it announced its plans to buy popular messaging service WhatsApp for a total of 19 billion dollars. Also Read - Facebook, Apple, Google, Amazon CEOs set to testify before US Congress in historic hearing
The deal, priced for a combined 16 billion dollars in cash and stock and additional 3 billion dollars in restricted stock units, apparently made the investors uneasy, who sent the shares down by 5 percent initially, before they recovered slightly. According to TechCrunch, the investors could be worried about potential dilution stemming from the deal, also, Facebook’s spending such a huge bill to acquire user growth via WhatsApp, puts its own core strengths of high engagement under stress. However, Facebook CEO Mark Zuckerberg and WhatsApp CEO Jan Koum managed to calm fears and pull the share price up a bit as they discussed how the latest acquisition would focus on growth rather than monetization.
Zuckerberg has assured that the messaging service, with about 450 million monthly users, would not have ads as it was not the right way to monetize messaging services. Facebook CFO David Ebersman noted that WhatsApp would not prioritize further roll out of the 1 dollar-a-year subscription fee it currently charges in some but not all countries. The incredibly expensive deal is more to do with Facebook’s aspirations for growth, especially in mobile and non-US markets, the report added.