Senator Josh Hawley of Missouri calls for breaking up Facebook (screen capture via Twitter).
A Bad Week Gets Worse For Facebook And Twitter
Last week on Slope, we noted Republicans’ anger at Twitter (TWTR) and Facebook (FB) for their suppression of the New York Post’s article about Hunter Biden (Twitter Incurs Republicans’ Wrath). That anger increased on Saturday with Senator Josh Hawley of Missouri calling for Facebook to be broken up. Let’s assess the situation and then look at how Facebook shareholders can limit their risk.
The Bad Week
On Wednesday, both Twitter and Facebook blocked their users from posting or sharing the New York Post’s exposé of Hunter Biden. New York Post op-ed editor Sohrab Ahmari accused both companies of digital totalitarianism. He accused Facebook in the column he tweeted below.
In his column, Ahmari pointed to the Democratic party connections of a key Facebook staffer:
Andy Stone, a member of Facebook’s p.r. team, said, “We are reducing [the Post story’s] distribution on our platform.” Before joining the social-media giant, Stone worked for Democratic Sen. Barbara Boxer and the Democratic Congressional Campaign Committee, yet he insisted that Facebook’s action was “part of our standard process to reduce the spread of misinformation.” Right.
Republican politicians including President Trump and Senator Josh Hawley criticized Facebook and Twitter too.
Pressure Builds On The Right…
A number of right-leaning pundits (Pedro Gonzalez, for example) pointed out that Republican Senators had promised to act against social media platforms before but done nothing.
Other observers on the right followed Sohrab Ahmari’s example and highlighted the political bias suggested by Facebook’s personnel.
… And On The Left
Prominent left-leaning think tanker Matt Stoller suggested conservatives had been duped by the big tech companies.
While left wing journalist Glenn Greenwald pushed back at The Atlantic for suggesting Twitter and Facebook weren’t monopolies.
It Gets Worse
On Saturday, Senator Hawley called for Facebook to be broken up.
November’s Election And Facebook’s Fate
If President Trump loses the election next month, the odds of the federal government acting against Facebook would be zero. If you’re long Facebook and want to add protection based on its political risk, you might consider hedging a bit past the election. Then you can reassess the risk after on the election’s outcome.
The election is on November 3rd, but some political correspondents have warned we may not know the outcome immediately, due to mail-in ballots. With that in mind, we used hedges expiring on November 20th in the video below. Here, we scan for optimal, or least-expensive, hedges using put options and collars to protect a Facebook position.
Note that there are options expiring on November 6th for Facebook as well. So if you are concerned about a drawn-out election, but you think it will be resolved by the 6th, you can scan for optimal hedges as we did in the video, but use that expiration date.