Facebook Inc (NASDAQ:FB) announced yesterday the closure of its deal to acquire Instagram, initially planned to cost about $1 billion.
Facebook Inc (NASDAQ:FB)’s plan to acquire photo-sharing app Instagram for $300 million in cash and 23 million shares was approved by the State of California on Aug 29, after lawyers and employees from Facebook and Instagram presented themselves at a hearing before the California Department of Corporations. Earlier the Federal Trade Commission announced on Aug 22 that it had closed its investigation of the deal “without taking any action.”
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After April’s announcement of the huge deal, much water has passed under the bridge. Most importantly, Facebook Inc (NASDAQ:FB) completed its historic IPO, which has had a troubled history because of the substantial depreciation in the value of the stock.
At levels of the stock around the time of closure, the acquisition of Instagram is valued at about $715 million.
In a welcoming message, Mike Scroepfer, Vice President of Engineering, says:
“So many of us at Facebook love using Instagram to share moments with our friends. And for so many people, sharing photos with friends is an important part of the Facebook experience. That’s why we’re so excited to bring Instagram to Facebook and see what we can create together.
As we said from the beginning, we are committed to building and growing Instagram independently. Instagram will continue to serve its community, and we will help Instagram continue to grow by using Facebook’s strong engineering team and infrastructure. We also can’t wait to work with the talented Instagram team to improve the mobile experience.
We’re looking forward to an exciting future with the Instagram team and to all of the great new experiences we’re going to be able to build together.”
Instagram is one of the fastest growing mobile apps in history, and garnered over 80 million users in less than two years.
Research by Pacific Crest Securities states that the major advantage of Instagram, in the short term, would be the impact on the DAU (Daily active users) statistic. Note that the user base of Instagram was 40 million at the time of acquisition and grew to 80 million by July. Pacific Crest expects the magic figure of 100 million to be crossed any time now. This could translate to an addition of 7.4 million DAU to Facebook Inc (NASDAQ:FB) in Q3. This is presently the main benefit, considering that Instagram currently has no revenues. This could help mask a decline in Facebook’s DAU in Q3, and avoid further bad press.