Facebook authorizes a $6B stock buyback

Facebook today said it is authorizing a $6 billion stock buyback that will go into effect in the first quarter next year.

Facebook in its last earnings call also said that its growth would likely slow as a result of the company reaching its maximum advertising load. While Facebook has historically grown at a very fast clip, the company is now in a position that it needs to find additional ways to create value for investors beyond just trying to expand its user base and gather more eyeballs to put ads in front of.

For Facebook, keeping control of the company doesn’t necessarily seem like an issue. Earlier this year, Facebook issued a new class of stock that would essentially keep Mark Zuckerberg in control of the company, enabling him to outmaneuver any kind of heavy pressure from Wall Street. That means Facebook can essentially continue to make long-term plays — while that may be to the chagrin of industry watchers and investors. However, share repurchases can sometimes be useful for reducing the overall amount of outstanding shares.

Companies can authorize a share repurchase for a number of reasons. For one, it represents an opportunity for the company to return value to shareholders (the company can also issue a dividend), which may be agitating the company to do something in order to build up goodwill with Wall Street. A near-term buyback can buy Facebook time to keep pressure off the company while investing in longer-term plays, such as growing its other platforms like Instagram and WhatsApp and investing in virtual reality.

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