Facebook share price closes lower amid Libra plans

Written by: Tsveta van Son
September 17, 2019

Facebook’s share price (NASDAQ:FB) ended trading lower yesterday, with investors digesting the social network’s plans to launch a new digital currency. The company explained that people would be able to make payments with the cryptocurrency, called Libra, via its own apps, and on messaging service WhatsApp.

Facebook’s share price shed 0.29 percent to close at $188.47 yesterday, underperforming the Nasdaq Composite which rallied 1.39 percent to end trading at 7,953.88. The social network’s shares have given up just under five percent of their value over the past year, as compared with about a 2.7-percent gain in the benchmark index.

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Facebook to launch Libra

Facebook announced in a statement yesterday that it had formed a new financial services subsidiary, called Calibra, which will introduce is a digital wallet for Libra, a new global currency powered by blockchain technology. The wallet will be available in Messenger, WhatsApp and as a standalone app, and is expected to launch next year.

“For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account,” Facebook commented in the statement, adding that it was hoping to address the challenge “with Calibra, a new digital wallet that you’ll be able to use to save, send and spend Libra”.

Facebook further noted that Libra would be backed by a reserve made to keep its value stable, and that paying with it would be as easy as texting, “and at low to no cost”.

Analysts weigh in on move  

Facebook’s share price, however, underperformed the market following the news. Bloomberg News quoted Jefferies analyst Brent Thill as commenting that given the recent run in the social network’s shares, “many investors may be over-estimating the near-term impact of a cryptocurrency launch”.

“We think most advertisers will wait and see what the potential impact will be on their businesses before allocating more ad dollars to FB,” he added. Mark Mahaney at RBC Capital Markets who has an ‘outperform’ rating and a $250 target on the Facebook share price, however, took a more positive stance.

“We view Facebook’s introduction of the Libra currency as a potential watershed moment for the company and global adoption of crypto,” the analyst pointed out, as quoted by Bloomberg News, adding that in terms of scale and importance, the broker believed that “this new financial structure could be viewed similar to Apple’s introduction of iOS to developers over a decade ago”.