The SIF currently owns 75 shares of Facebook (FB) and it makes up 2% of the portfolio. Although the company has grown its profitability and has a relatively low beta of .62 over the past 3 months, the ongoing concerns over data collection, privacy issues, personnel conflicts, and Russian interference pose sufficient risk to warrant selling out of this position. Selling Facebook is part of SIF’s effort to reduce its large exposure to the tech sector. Facebook has had a slowly shrinking user base as people transition towards other types of media. It faces many systemic risks such as regulation and management caused scandals. The most recent WSJ article highlights problems that do not appear to be diminishing anytime soon. In addition, there seem to be conflicts between Mark Zuckerberg and Sheryl Sandberg. Some key personnel have recently left the company, such as the founders of Instagram, the founders of Whatsapp, and the founder of Oculus Rift. Much this information has already been priced-in: FB’s share price declined over 30% since its peak in July 2018. However, it is our view that this is just the tip of the iceberg. Even if Facebook’s reputation could be saved, the risk of new regulation is sufficiently high that we see Facebook’s long-term prospects as limited.
by Ross Kesselman ’21 and Rory Nizolek ’19