Published On: Sun, Nov 20th, 2016

Facebook Announces $6 Billion Stock Buyback — Plan to Battle Fake News

Has Facebook's stock dropped because of its problems with fake news stories?


Facebook has decided to buy back $6 billion of its own shares. The decision comes as the company’s stock has slipped recently and it is reeling from complaints about fake news stories proliferating on its systems.

This is the first time in the young company’s brief history that it has engaged in a stock repurchase. And such buybacks can be good for business as having less stock out on the open market can lead to higher prices, while giving the company more control over itself.

But critics point out that the money could have been used in dividend payments to stockholders, improvements to the company’s services or even bonuses to Facebook employees across the board.

Facebook shares have dropped 13% since October 25 when they hit a 52 week high of $133.50. This involves class A stock. But what has caused the drop?

Well Forbes speculates that it may have to do with Donald Trump’s victory. The company’s stock has plummeted by 6% since election day. Some say that all tech is hurting now because of uncertainty among investors with regards the tech industry in the Trump era.

Or maybe it has more to do with all of the negative publicity that Facebook has received in the wake of all those fake news reports during the elections. Remember the posts which claimed that people like Denzel Washington and the Pope had endorsed Donald Trump? Some have even gone so far as to blame Facebook for Donald Trump’s victory.

Then there was the perceived failure on Mark Zuckerberg’s part to acknowledge that there even was a problem. More than a week ago in a discussion with Facebook staff Zuckerberg said that he thought all the criticism of his company was crazy.

Well now the Facebook CEO is changing his tune on the matter. Zuckerberg made a post on his Facebook page on Saturday saying that his company takes, “misinformation seriously. Our goal is to connect people with the stories they find most meaningful, and we know people want accurate information. We’ve been working on this problem for a long time and we take this responsibility seriously. We’ve made significant progress, but there is more work to be done.”

While describing the problem as complex and still insisting that false news stories are just a small percentage of all Facebook news feeds, Zuckerberg did outline a plan by which the company will combat fake news in the future.

First he promised stronger detection, meaning improved technical systems to detect what people will flag as false before they do it themselves.

Easier reporting, i.e making it much simpler for people to report stories as fake and therefor help Facebook catch more misinformation faster.

More third party verification.

New warnings: “We are exploring labeling stories that have been flagged as false by third parties or our community, and showing warnings when people read or share them, ” he explained.

Mark Zuckerberg also reiterated what was announced by his company last week, that Facebook would make it harder for fake news web sites to partake in Facebook advertising programs. This will deny them much needed revenue streams as well as new sources of traffic and might even force them to shut down. Google has made similar promises with regards to its Ad Sense system.

An example of fake news on social media:

So did Facebook really make Donald Trump President? Of course not. Does it have a problem with growing negativity associated with the world’s largest social media platform because of the proliferation of fake news? Yes.

So now Facebook has addressed two problems. In buying back stock it can increase the value of its shares. In showing a concerted effort at combating fake new the company can improve its image and also raise its share price.

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