Will the FTC take a bite out of FAANG stocks?
Markets have responded so far with a shrug to the latest salvo against Big Tech by the US Federal Trade Commission, and while the outcome is still unknown, one positive from the investigations into anti-trust issues for the likes of Google, Amazon and Facebook is likely to be a better understanding of technology’s impact on society, says Bruce Croxon of Round13 Capital.
The FTC sent requests earlier this week to Amazon, Apple, Facebook, Google and Microsoft asking for information related to acquisitions the companies have made over the past decade with an eye to instances where the tech companies at the time had not been required to report to antitrust agencies.
“Digital technology companies are a big part of the economy and our daily lives,” said FTC Chairman Joe Simons in a public release on Tuesday.
“This initiative will enable the Commission to take a closer look at acquisitions in this important sector, and also to evaluate whether the federal agencies are getting adequate notice of transactions that might harm competition. This will help us continue to keep tech markets open and competitive, for the benefit of consumers.”
The Commission plans to study trends in acquisitions and the structure of deals in the context of potential restrictions in competition and says that it “seeks to learn more about how small firms perform after they are acquired by large technology firms.
None of the tech names mentioned in the probe have seen marked drops in share prices over the past two days, indicating a lack of concern from investors over the announcement, a new wrinkle in the continuing investigations by agencies both in the US and the European Union over the scale and reach now exerted by tech’s biggest companies.
It’s political, says Bruce Croxon…
Croxon says the FTC’s latest move is a sign that agencies are getting more nuanced in their probes.
“What they’re talking about is going back and even looking at the smallest acquisitions they’ve made and I think that’s important, the reason is that we’re in an age where the value of a technology stock, particularly at the early stages, is not just reflected in how much revenue you’re doing. It’s the IP that’s being created, and often the most valuable companies are either slow to get revenue, the revenue would have been less than ten years ago when you were selling big amounts of software and the hardware that went with it,” says Croxon, speaking on The Disruptors on BNN Bloomberg Wednesday.
“If you had’ve said when [Facebook] bought Instagram, if you could fast forward x number of years and realize that between Google and Facebook 80+ per cent of the ad market would be controlled by two companies, would we have felt differently? That is a heck of a concentration that would have been very difficult to project at the time of the Instagram acquisition,” he said.
Croxon suggested that ties between Big Tech and power brokers in the US may come into play in terms of how deep the FTC’s probe will go.
“I think it will [slow down Big Tech] but there’s a bit of a conflict of interest going on,” Croxon said. “The FTC is supposed to be investigating these people but they’re also letting all kinds of messaging through on their platforms. No one is coming down on the messaging that these platforms are putting out in support of, for example, the Republican Party and allowing doctored videos and these kinds of things. How hard is the FTC really going to come down, particularly within a Republican administration?”
“So if I’m a public holder of these stocks, I’m not all that worried. It’s based on politics, not on what should be happening,” he said.