Shares in U.S. tech giant Meta Platforms (META) were higher today despite being accused of holding back the growth of its photo-sharing app Instagram.
Instagram Lacked Resources
As reported in the Financial Times, the co-founder of Instagram Kevin Systrom told antitrust regulators in Washington that Meta failed to provide the sufficient resources it needed to hit its growth potential. This followed its $1 billion acquisition by Meta back in 2012.
Systrom was giving evidence in a federal court in Washington after being called as a key witness by the U.S. Federal Trade Commission (FTC) in a monopoly trial which could lead to the break-up of the Meta business.
However, despite Systrom’s testimony Meta shares were up nearly 4% in pre-market trading.
Systrom said Meta believed that Instagram was “hurting Facebook’s growth” and that this led to it in 2018 cutting off a number of tools initially provided by Meta after the takeover to help Instagram grow. It also, he said, did not provide the staff needed to develop the business.
This was one of the reasons, he claimed, for his and fellow co-founder Mike Krieger’s departure from Instagram in 2018. Another was Meta’s strategy of merging its systems with Facebook and WhatsApp to create a “family of apps.”
Prevent Facebook Collapse
Systrom’s comments seem to back up the FTC case that Meta suppressed the app’s growth after buying it to avoid Facebook’s “network collapse.” That quote is taken reportedly from a confidential email written by Meta boss Mark Zuckerberg in 2018.
As reported by the FT, Meta’s lawyer however argued that the social media company had helped drive growth at Instagram, which had just 13 staff and no revenue when it was acquired. He also pointed to measures implemented by Meta to help boost engagement on Instagram such as not charging it to advertise on Facebook.
The company is also facing scrutiny for its purchase of WhatsApp in 2014 for $19 billion.
According to a report by the Wall Street Journal, Zuckerberg had offered $450 million to settle the FTC lawsuit in late March. However, the regulator rebuffed the offer, calling it insufficient since the FTC is seeking damages of at least $18 billion along with a consent decree.
Is META a Good Stock to Buy Now?
On TipRanks, META has a Strong Buy consensus based on 42 Buy, 3 Hold and 1 Sell rating. Its highest price target is $935. META stock’s consensus price target is $712.86 implying an 42.49% upside.
