Shares of Facebook Inc. (FB) rose sharply on Tuesday, as traders shrugged off an apparent disagreement at the Federal Trade Commission (FTC) over the size of the social media company’s privacy settlement. In its most recent earnings report, Facebook said it expects to pay up to $5 billion for privacy missteps tied to the Cambridge Analytica scandal.

 

FTC Deadlocked

As The Wall Street Journal recently reported, federal regulators at the FTC are in disagreement over the settlement amount, with Democrats and Republicans on opposite sides of the divide.

Republican Chairman Joseph Simons has been unable to secure votes from at least one of the FTC’s two Democrats who believe harsher actions against Facebook are warranted. The panel reviewing the case is made up of five people, including three Republicans and two Democrats. Although the Republican representation can outvote any Democratic opposition, it’s important that the settlement receives bipartisan support.

That’s because consumer groups want to see the FTC united in how it treats privacy breaches of the magnitude of Cambridge Analytica.

Facebook has been under investigation for more than a year after it came to light that Cambridge Analytica obtained the data of tens of millions of users. The political consulting firm worked on President Trump’s 2016 presidential campaign. The scandal not only threw Facebook under the bus, it prompted a much bigger debate over the role of social media advertising in the political process.

 

FB Shares Unaffected — For Now

FB stock crashed last summer after the Cambridge Analytica scandal surfaced, resulting in the biggest single-day market cap loss in U.S. trading history.

It has been a rollercoaster year for Facebook’s stock. Share prices crashed last summer after the Cambridge Analytica scandal surfaced, resulting in the biggest single-day market cap loss in U.S. trading history. In just a single session, Facebook’s market capitalization plummeted by $120 billion.

While Facebook has yet to reclaim its prior peak, the stock has recovered sharply through the first five months of 2019. Since bottoming near $123 on Christmas Eve, FB has rebounded almost 50%.

FB was up by as much as 2% on Tuesday. The company has a total market capitalization of $526 billion.

Facebook Share Price 1 Year - May 28 2019

Source: Yahoo Finance

A stronger business model has underpinned Facebook’s quick turnaround. The company generated $15.08 billion in revenue last quarter, far outpacing forecasts. The increase was due to higher advertising revenue on its Stories feature, which spans the network’s Facebook, Messenger, WhatsApp, and Instagram platforms.

 

Conclusion

The FTC is expected to reach a final settlement in the coming days. How the FTC treats Facebook’s privacy missteps will impact the regulator’s credibility. It will also mark an important precedent in how future data breaches are handled.

Disclaimer: Author holds no investment position in Facebook at the time of writing. 

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