Facebook Inc. (NASDAQ: FB) has approved a repurchase of Class A common stocks worth $6 billion to make stockholders happy, starting from the first quarter of 2017, according to a news report from Bloomberg.
The social media giant has been investing moderately in new economic areas with volatile returns, giving shareholders concerns over their investments. But in the first move of its kind in the company, it is authorizing the buyback of $6 billion worth of stocks to allay the fears of its investors.
In a regulatory company filing, the common revealed it has stowed away $26 billion in marketable securities and cash, and that part of this amount will be leveraged into the stocks repurchasing bid and in other identified growth areas in the company.
According to the filing made to the SEC, Facebook revealed the amount and time for buying back the stocks will be determined by certain factors such as stock price, market conditions, business ratings, and alternative investment opportunities among others. The buyback program will kick off based on the company’s strategy for long-term investments that expand the infrastructure of the organization over a long term basis.
Since Facebook makes the bulk of its money from digital ads and other related enterprises, the social media company spent billions of dollars in 2014 to acquire WhatsApp and Oculus, prompting Brian Wieser of Pivotal Research Group to disclose that Facebook is very wealthy but judicious in the way it invests its wealth.
Meanwhile, Facebook is not the first major tech company to buy back stocks as a way of divesting its portfolio; Apple did it in 2012 and Alphabet’s Google followed the same in October 2015. However, since the news was released after trading hours on Friday, the stocks of Facebook rose by 1%.
Facebook revealed it has various long-term options for increasing its capital, but the buyback will give value to the investments of shareholders while also compensating employees via stock options. However, the company has hinted it will be spending more money to hire technical engineers in the coming year as well as to enlarge its business and technical infrastructure.
According to an analysis from TechCrunch, Facebook’s bid to repurchase Class A common stocks in the first quarter of next year is quite necessary since the company has reached its maximum advertising load. The company has done well in terms of increasing its user base and earning more in ads revenue; it is now time to reward investors and employees.