Facebook’s billion dollar buying spree of the photo app Instagram faces an investigation by the FTC over potential antitrust issues, the Financial Times reported.
The trade commission has already begun questioning Facebook competitors Google and Twitter.
Investigations are fairly routine for acquisitions of more than $66 million, which definitely counts the Facebook/ Instagram deal at a billion dollar plus price tag, depending on how the IPO shakes out. However, the probe could delay Facebook’s day to go public, currently scheduled for around May 18, give or take a potential day or two of stalling from the social network.
Facebook stated in IPO documents it expected the deal to close in the second quarter, which would be “extremely optimistic,” David Balto, a former policy director at the FTC who is now an anti-trust lawyer, told the Financial Times.
Though the deal will probably be ultimately approved, investigators are likely to take careful time in the investigation, perhaps even months.
Aside from potentially delaying the IPO, the investigation and the delay of approval of the Instagram deal could further stall Facebook’s mobile strategy, which is fairly lagging compared to the company’s success and an admitted weakness in the company’s SEC filing to go public.
Facebook paid $300 million in cash for Instagram, plus 23 million shares of Facebook common stock. Based on a starting price of $28 to 35 per share, Instagram will likely pull between $650 and 800 million for the deal as soon as the IPO bell begins its toll. That puts a much steeper value to the billion dollar price tag stamped on the deal at the time it was announced.
If the FTC should reject the Facebook/Instagram deal, Facebook will write the company a $200 million check as a breakup fee, as stipulated in its amended S-1 filing.