The uncertainty surrounding social media giant Facebook could potentially impact the US fund industry, which holds 27.3% of its outstanding shares in mutual funds and exchange-traded funds. This equates to approximately 800 million shares.
Facebook (FB) fell 10.7% and lost over $57bn in market value over the three trading days following news that Cambridge Analytica, a political data firm, gained access to the private information of approximately 50 million Facebook users without their permission.
While the stock price stabilized during the second half of the week, this massive data-privacy breach raised uncertainty around Facebook as talk of government regulation and shareholder lawsuits hit the wires by the end of the week.
Ownership at the fund management company level is fairly heavily concentrated; the fund companies with the ten largest investments (see graph below) own a combined 17.3% stake in Facebook. The largest stakeholders are a mix of actively managed and passive shops. The largest passive holder is Vanguard Group, which owns 161.4 million shares or 5.6% of the shares outstanding.
Fidelity Management and Research Company, an active shop, is number two on the list with 132.7 million shares (4.6%). At the fund level, the $129.6bn Fidelity Contrafund (FCNTX) is the largest single owner with 49.5 million shares. Contrafund recently reduced its stake in Facebook by 480,000 shares, so it will be interesting to see if this week’s developments spur further selling.
The third largest position in Facebook belongs to Capital Research & Management, another active manager, with 44.2 million shares (1.5%). The $179.2bn American Funds Growth Fund of America (AGTHX) sold 4.7 million Facebook shares in the fourth quarter of 2017, lowering its stake to 17.5 million. Therefore, it warrants watching whether the news provides the impetus for the fund to continue selling.