Facebook shares rise as details of plan to launch digital currency emerge

Facebook’s shares climbed on Friday following reports detailing the company’s plans to launch a digital currency, due to be unveiled next week.

Details emerged late this week concerning plans to roll out a cryptocurrency strategy on June 18th.

The Wall Street Journal reported it had signed up a number of major companies – including Visa, Mastercard, PayPal and Uber – to back the project.

Separately, a Facebook spokeswoman confirmed reports that UK bank lobbyist Ed Bowles is joining the company, but declined to comment further. Mr Bowles's new title at Facebook will be public policy director for Northern Europe, according to a person familiar with the situation.

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The cryptocurrency plan "may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams,'' RBC analyst Mark Mahaney wrote.

Mr Mahaney, who rates the stock outperform, didn’t give an estimate of the potential upside the company could see.

The stock rose as much as 2.5 per cent in morning trading, extending a recent uptrend, to rank as the best-performing stock in the Nasdaq 100, which slipped 0.4 per cent.

Shares of the social-networking company are on track for their eighth rise in the past nine trading days, and they are up more than 10 per cent from a low earlier this month.

Concerns

The crytpo push could facilitate platforms including payments, shopping, applications and gaming, and would leverage its broad user base in Asia, where it has nearly four times as many monthly active users as it does in North America, Mr Mahaney noted.

The share price gains come as concerns continue to ease over the prospect of greater regulatory scrutiny with some analysts predicting a possible breakup could mean an upside to shares.

"Investors may be getting relatively comfortable with the underlying regulatory risk" facing major internet and technology stocks, wrote Youssef Squali, an analyst at SunTrust Robinson Humphrey. "There may be a growing realisation that even in case of a breakup of these behemoths, the value of the parts may be higher than the whole over time."

According to its calculations, Facebook's five main businesses – the namesake social network, Instagram, Facebook Messenger, WhatsApp and Oculus – have a sum-of-the-parts valuation that implies a share price of $226, or 27 per cent above Facebook's closing price on Thursday.

SunTrust added that it was “likely to take years” for any regulatory measure to be implemented and enforced, but the commentary echoes an argument that has been repeatedly made about Google parent Alphabet, which is also facing antitrust scrutiny.

Earlier this week, MoffettNathanson upgraded its view on Facebook, writing that "improving underlying fundamentals" and new growth opportunities would offset "the risk of greater regulatory scrutiny". On Thursday, Deutsche Bank also wrote that Facebook's video-streaming service could grow to generate $5 billion (€4.4 billion) in annual ad revenue over the next few years.

– Bloomberg