Here’s Why Facebook Just Gained $21 Billion in Value

Facebook[/f500link] CEO Mark Zuckerberg faced off with a room full of senators on Tuesday in what many believed would be a tough grilling about privacy in the wake of news that political consulting firm Cambridge Analytica had obtained data about 87 million Facebook users.

But investors concluded that Zuckerberg responded to the challenge better than expected, sending the company’s shares up 4.5% to $165, their biggest one-day gain in nearly two years.

With the gain, Facebook added $21.3 billion in market value to $479.4 billion. That reverses some of the company’s 15% in lost valuation since reports emerged in March, when the news about Cambridge Analytica first erupted.

Of course, some of the rise could be also be attributable to the general market optimism on Tuesday after China appeared more conciliatory about a potential trade war. The Nasdaq Composite rose 2%.

Rather than squirming in his seat during the questions about data privacy and Russian-backed political ads, Zuckerberg appeared poised and in control on Tuesday. Instead, it was the lawmakers who appeared to have forgotten their homework.

“How do you sustain a business model in which users don’t pay for your service?” Sen. Orrin Hatch (R-UT) asked Zuckerberg, apparently unaware how Facebook made money. Zuckerberg deadpanned, “Senator, we run ads,” eliciting responses like the following on Twitter:

Facebook’s stock gains came despite lawmakers having plenty of ammunition against the company in addition to the Cambridge Analytica scandal. The honeymoon period between Silicon Valley and Washington D.C. has been fading quickly over the past year and a half, with lawmakers questioning to what extent Facebook had influenced the outcome of the presidential election by allowing fake news and Russian-backed political ads onto its platform. Critics also question whether Facebook had censored some conservative content in favor of content more favorable to liberals.

Shares of Twitter also received a boost on Tuesday, rising as much as 7%, or $878.6 million in value for a total market capitalization of $22.2 billion.

Still, Facebook isn’t out of the woods yet. Shares of the company are still about 11% below their pre-Cambridge Analytica price.

Meanwhile, it still remains to be seen whether lawmakers may seek to impose new regulations on tech firms. Both Twitter and Facebook said Tuesday ahead of the hearing that they would support the Honest Ads Act, a proposed piece of legislation that would require tech firms that sell ads to disclose how much they are paid for placing political ads on their platform.

Senators have also urged Google to support the act, although the tech giant has yet to comment. Shares of Google were up 1.5% on Tuesday, roughly in line with the wider market.

Facebook’s Most Popular Black Lives Matter Page Was Fake and Had Ties to a White Australian Man

The largest Black Lives Matter page on Facebook was discovered to be a fake with ties to online fundraisers that raised nearly a $100,000 — some of which was transferred to Australian bank accounts — raising questions over how Facebook verifies the identity of its pages.

The page bore the same exact title of the actual organization but had more than twice the amount of followers — nearly 700,000 in total — according to a report from CNN. The outlet found the page was connected to a “middle-aged white man in Australia” and used services such as PayPal, Patreon and Donorbox to collect money that was intended to be for Black Lives Matter-affiliated causes in the U.S.

PayPal and Patreon suspended the campaigns upon learning of the page’s connections via CNN, the outlet reports. Donorbox and another fundraising platform, Classy, had already done so.

It took nearly a week for Facebook to suspend the page after being contacted by CNN, according to the outlet. The incident comes days before Facebook CEO Mark Zuckerberg is set to testify in front of Congress in the wake of the Cambridge Analytica data scandal that brought to light Facebook’s difficulty in protecting its users’ personal data.

The fake Black Lives Matter page was linked to Ian Mackay, a National Union of Workers official in Australia, according to CNN. The union did not immediately respond to a request to comment from Fortune.

Last week, Facebook announced plans to ensure verification of its pages with a large number of followers. “This will make it much harder for people to administer a Page using a fake account, which is strictly against our policies,” Facebook wrote in a statement. “We will also show you additional context about Pages to effectively assess their content. For example, you can see whether a Page has changed its name.”

Fortune has reached out to Facebook for comment and will update this story when the company responds.

Arizona election database targeted in 2016 by criminals, not Russia: source

WASHINGTON (Reuters) – A hack on an Arizona election database during the 2016 U.S. presidential campaign was carried out by suspected criminal actors and not the Russian government, a senior Trump administration official told Reuters on Sunday.

A woman arrives at a polling site during the U.S. presidential election in Phoenix, Arizona, U.S., November 8, 2016. REUTERS/Nancy Wiechec

The official was responding to a report on CBS News’ “60 Minutes” citing an internal government document that Russian hackers successfully infiltrated computer systems associated with at least four U.S. states, including Arizona, leading up to the 2016 election.

Hackers working for the Kremlin breached systems in Illinois, a county database in Arizona, a Tennessee state website and an information technology vendor in Florida, according to the previously undisclosed Oct. 28, 2016, assessment from the Department of Homeland Security, according to the program.

But an administration official, speaking on condition of anonymity, said media reports had at times relied on outdated or incomplete information and conflated criminal hacking with Russian government activity. The cyber attack on Arizona was not perpetrated by the Russian government, the official said.

Media outlets including Reuters reported in August 2016 that the Federal Bureau of Investigation had detected Russian breaches of voter registration systems in Arizona and Illinois.

Reuters was not immediately able to confirm the authenticity of the DHS assessment, which would have been issued less than two weeks before the election. A DHS representative could not immediately be reached for comment.

FILE PHOTO – The U.S. and Arizona flags flutter in the wind in Fountain Hills, Arizona, U.S. on September 30, 2016. REUTERS/Ricardo Arduengo

U.S. intelligence agencies last year accused Russia of using hacking, false information and propaganda to disrupt the 2016 election and try to ensure Republican Donald Trump defeated Democrat Hillary Clinton. Russia denies interfering in the election. Trump has denied any collusion between his campaign and Moscow.

In June 2017, the news website The Intercept published a classified U.S. intelligence document that described a spear-phishing attack waged by Russian military intelligence on a U.S. election software company based in Florida.

The alleged breach of Tennessee’s state website had not been previously reported.

U.S. officials have repeatedly said publicly that at least 21 of the 50 states had experienced initial probing of their election systems from Russian hackers in 2016 and that a small number of networks were compromised.

While DHS has said there is no evidence any votes were actually altered, it has not publicly provided full details regarding which states experienced compromised systems or how deeply hackers penetrated them.

Americans vote in November in congressional elections, which U.S. intelligence officials have warned in recent weeks could be targeted by Russia or others seeking to disrupt the process.

Reporting by Dustin Volz; Editing by Peter Cooney

Buy This Oversold Blue-Chip Bank With A 5.4% Dividend

On April 4th, Bloomberg reported that HSBC (HSBC) is considering an exit or sale from smaller consumer operations such as Bermuda, Malta, and Uruguay. In addition, the bank plans to expand its asset management division and is currently looking at a potential merger with a rival.

In our view, the news confirms that the group’s management will remain committed to transforming HSBC into a more focused and more efficient banking institution. More importantly, even though HSBC’s operations in Bermuda, Malta, and Uruguay are small compared to the group’s total assets, we believe a potential sale of these units would have a positive impact on the bank’s capital position, supporting stock buybacks and special dividends.

The recent rise in LIBOR should support HSBC’s NIM

LIBOR has grown by more than 130bps since the beginning of the year. Such a notable increase is currently among the most widely discussed topics. Several analysts suggest that this is an early indicator of a bear market or even a severe financial crisis. In our view, the increase has been driven by idiosyncratic reasons, in particular, higher supply of short-term Treasuries and lower demand from corporates due to the US tax reform.

Source: Bloomberg

With that being said, despite the reasons of the rise in LIBOR, HSBC should benefit from higher short-term rates. As shown below, the bank discloses its NII (net interest income) sensitivity to a shift in yield curves. However, this analysis is based on a parallel shift, while yield curves in most global economies continue to flatten.

Source: Company data

What is important here is that HSBC has a variable-rate loan book. More importantly, a significant part of its credit portfolio is priced off short-term rates. This suggests to us that the rise in LIBOR should be a positive for the bank’s asset yields and its NIM.

Source: Company data

One may argue that higher short-term rates will also affect HSBC’s funding costs, especially given that wholesale sources and corporate deposits are generally tied to the short-end of the yield curve. The caveat here is that HSBC has a unique funding position. As shown below, the bank has one of the lowest LtD (loans-to-deposits) ratios among European banks. In other words, HSBC does not need expensive deposits in order to fund its loan growth. HSBC had been struggling from abundant liquidity for many years as a low interest rate environment has virtually crippled its NIM. Given that rates have started rising, the bank’s excessive liquidity is gradually turning into a positive that will protect HSBC’s NIM in a rising interest rate environment.

European banks: Loans-to-deposits ratio

Source: Bloomberg, Renaissance Research

Saudi Aramco’s IPO

Saudi Aramco (Private:ARMCO) has appointed HSBC as an adviser on its much-awaited IPO. JPMorgan (JPM) and Morgan Stanley (MS) will also act as consultants. As such, HSBC is the only non-US bank that will have a crucial role in Aramco’s IPO.

Anecdotal evidence suggests that while many US and UK investors are skeptical on Saudi Aramco’s IPO, as state-owned oil companies have been underperforming their private peers for quite a while now, Chinese investors would be interested in Aramco’s shares. Hong Kong Exchanges and Clearing (OTCPK:HKXCF) (OTCPK:HKXCY) plans to introduce the so-called Primary Connect program, which would allow mainland Chinese investors to participate in initial public offerings on the HKEX.

We believe Aramco’s IPO would strengthen HSBC’s position in the region. In our view, it would also underpin the fact that HSBC is a global banking group with unique access to Chinese investors.

Buybacks and dividends

HSBC pays a $0.51 dividend per ordinary share or $2.55 per ADR. That corresponds to a 5.4% dividend yield, based on the current ADR price. We believe that a 5.4% dividend from a global blue-chip bank with a strong presence on Asian markets looks very attractive.

Additionally, it is also worth noting that the bank has temporarily suspended its buyback program due to technical reasons related to the issuance of additional Tier 1 capital. We expect HSBC to announce a new buyback in the second half of 2018.

Final thoughts

The shares have fallen by almost 15% since January, and we believe this sell-off represents a great opportunity to buy a global bank with an attractive dividend yield. HSBC has excess capital, thanks to its US unit, and, as a result, we expect the bank to announce a new buyback program in the second half of the year.

If you would like to receive our articles as soon as they are published, consider following us by clicking the “Follow” button beside our name at the top of the page. Thank you for reading.

Disclosure: I am/we are long HSBC, JPM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We’re Keeping Track of All of Facebook’s Scandals So You Don’t Have To

Facebook in recent weeks has been plagued by yet another scandal, as the social networking giant struggles to deal with the fallout from the Cambridge Analytica controversy.

On Wednesday, it was revealed that initial figures estimating Facebook exposed the data of 50 million users without direct consent were actually much higher than reported, closer to 87 million instead. And Facebook CEO Mark Zuckerberg is now set to testify in front of Congress next week.

But this isn’t the first time Facebook has been embroiled in controversy. The social media company has been involved in a number of scandals just over the past week alone.

Here’s a list of Facebook’s ongoing dilemmas:

Cambridge Analytica

The political analysis firm acquired the data of millions of Facebook users from a researcher who collected it via a quiz app on the platform. Cambridge Analytica was also linked to President Trump’s campaign during 2016 and had used the data to build psychological voter profiles ahead of the election.

The revelations sparked immediate backlash as politicians in Washington demanded Zuckerberg testify in front of Congress and calls to #DeleteFacebook started trending on social media sites like Twitter. After an ominous period of silence, Zuckerberg apologized and later agreed to testify on April 11.

Retaining users’ deleted videos

One of Facebook’s responses to the Cambridge Analytica incident was to allow users to download their data archive on the social network in order for users to fully understand what information Facebook stores. This move inadvertently trigged more outcry when users discovered that videos recorded on the platform they had thought they had deleted were still present in Facebook’s archive.

Facebook in turn apologized and called the retention an unintentional “bug.” But the error will likely do little to reassure the public in the wake of a much larger ongoing scandal.

Internal political struggles

Recent anger at Facebook has even come from employees within the company after a 2016 memo written by a Facebook vice president, Andrew Bosworth, leaked last week. In it, Bosworth appears to argue that Facebook’s growth is more important than safety concerns, stirring outrage internally, according to BuzzFeed News.

“Maybe someone dies in a terrorist attack coordinated on our tools,” Bosworth wrote, the outlet reported. “And still we connect people. The ugly truth is that we believe in connecting people so deeply that anything that allows us to connect more people more often is *de facto* good.”

Bosworth confirmed in a statement on Twitter last week that he wrote the memo. “I don’t agree with the post today and I didn’t agree with it even when I wrote it,” he said. “The purpose of this post, like many others I have written internally, was to bring to the surface issues I felt deserved more discussion with the broader company.”

Russia meddling and “fake news”

One of the dominating storylines of the 2016 presidential election was Facebook’s role in allowing Russian propaganda to spread across the social network. Facebook admitted last year that fake Russian Facebook accounts had purchased more than $100,000 in ads, which U.S. intelligence agencies say were intended to influence the election in favor of Donald Trump.

Facebook was additionally implicated in its role of distributing misinformation, a.k.a. “fake news,” from phony news sites, more often than not targeted at Hillary Clinton during the campaign, but rampant on both sides nonetheless.

“The problems here are complex, both technically and philosophically,” Zuckerberg wrote days after election night, discussing the company’s plans to combat fake news. “We believe in giving people a voice, which means erring on the side of letting people share what they want whenever possible. We need to be careful not to discourage sharing of opinions or to mistakenly restrict accurate content.”

Public profiles being scrapped

Another fallout from the Cambridge Analytica scandal was Facebook’s revelation on Wednesday that “malicious actors” used the platform’s search tools to obtain personal information of millions of users. Until Wednesday, third parties could do this merely by running a script that enters phone numbers or email addresses into Facebook’s search function in order to create a database.

“Given the scale and sophistication of the activity we’ve seen, we believe most people on Facebook could have had their public profile scraped in this way,” Chief Technology Officer Mike Schroepfer wrote in statement. “So we have now disabled this feature. We’re also making changes to account recovery to reduce the risk of scraping as well.”

Secret deletion of Zuckerberg’s messages

Facebook users can’t delete messages from someone’s inbox they sent a message to, but Zuckerberg can, according to a recent TechCrunch report. The site reviewed old messages sent between sources and Zuckerberg and, strangely, Zuckerberg’s messages were removed despite their responses still being viewable.

Facebook told the outlet it was a corporate security measure. “After Sony Pictures’ emails were hacked in 2014 we made a number of changes to protect our executives’ communications,” the company said in a statement to TechCrunch. “These included limiting the retention period for Mark’s messages in Messenger. We did so in full compliance with our legal obligations to preserve messages.”

But questions remain over why Facebook never publicly disclosed these measures. On Friday, Facebook said it would create an “unsend” feature within the next few months, and that Zuckerberg would be barred from using the feature until it was available to everyone.

Photo and link scans over Messenger

Another privacy-related revelation over the past week: Facebook scans images and links sent between users via Messenger, according to Bloomberg. The company says the practice is done in order to flag content that doesn’t adhere to the platform’s standards. While the practice might sound good in theory, some users took issue with it at a time when Facebook’s ability to uphold privacy is under scrutiny.

Facebook stands by the measure. “For example, on Messenger, when you send a photo, our automated systems scan it using photo matching technology to detect known child exploitation imagery or when you send a link, we scan it for malware or viruses,” a Facebook Messenger spokeswoman told Bloomberg. “Facebook designed these automated tools so we can rapidly stop abusive behavior on our platform.”

Spreading hate speech in Myanmar

Once again, Zuckerberg came under fire this week after he told Vox’s Ezra Klein that Facebook helped snuff out anti-Rohingya propaganda through the Messenger scans mentioned above. While conceding that users can take advantage of Facebook’s tools, Zuckerberg said, “In that case, our systems detect that that’s going on. We stop those messages from going through.”

In response, six organizations in Myanmar signed a letter to Zuckerberg rejecting the CEO’s claim. “The Messenger platform (at least in Myanmar) does not provide a reporting function, which would have enabled concerned individuals to flag the messages to you,” the letter read. “Though these dangerous messages were deliberately pushed to large numbers of people – many people who received them say they did not personally know the sender – your team did not seem to have picked up on the pattern. For all of your data, it would seem that it was our personal connection with senior members of your team which led to the issue being dealt with.”

Canada, B.C. in joint investigations of Facebook, AggregateIQ

VANCOUVER (Reuters) – The Canadian federal agency charged with protecting privacy rights of individuals said on Thursday that it, along with its counterpart in British Columbia, will jointly investigate Facebook Inc (FB.O) and Canadian data firm AggregateIQ, over an ongoing data sharing scandal.

FILE PHOTO: Facebook logo is seen at a start-up companies gathering at Paris’ Station F in Paris, France on January 17, 2017. REUTERS/Philippe Wojazer/File Photo

The Office of the Privacy Commissioner of Canada said the probes, which broaden two existing investigations, will look at whether the companies broke federal and provincial personal privacy rules.

FILE PHOTO: A woman walks past an empty office suite, which had until recently been used by Canadian data firm AggregateIQ, in a building in Victoria, B.C., Canada March 27, 2018. REUTERS/Kevin Light

Canada’s privacy commissioner launched an investigation of Facebook in March after the New York Times and London’s Observer newspaper broke news of the use of Facebook data by political consultancy Cambridge Analytica.

Facebook Canada said on Wednesday that more than 600,000 Canadians had their data “improperly shared” with Cambridge Analytica.

British Columbia’s privacy commissioner was separately investigating AggregateIQ over whether the Victoria-based company had broken provincial personal privacy rules for its role in the Brexit campaign.

The two agencies will now jointly investigate the companies, as they are subject to both federal and provincial personal privacy laws.

Reporting by Julie Gordon in Vancouver; Editing by Chris Reese and Richard Chang

Atlanta takes down water department website two weeks after cyber attack

(Reuters) – Atlanta took down its water department website indefinitely on Thursday, two weeks after a ransomware cyber attack tore through the city’s computer systems in one of the most disruptive hacks ever to strike a U.S. local government.

A view of Atlanta’s City Hall, in Atlanta, Georgia, U.S. March 31, 2018. REUTERS/Laila Kearney

“The Department of Watershed Management’s website … will be offline for server maintenance and updates until further notice,” the City of Atlanta wrote on Twitter.

Atlanta’s watershed department was among the operations hard-hit by the March 23 attack that continues to block access to databases, postpone municipal court dates and stifle the city’s ability to collect some payments for public services.

Employees with the water department said they were unable to turn on their work computers or gain wireless internet access for roughly a week after the attack, but they were instructed to report to their offices at City Hall anyway.

Many of the department’s systems have lumbered back to life in recent days, but there is still disruption, said one employee, who asked not to be identified.

“There’s definitely work not being done and there’s definitely bills not being able to be paid,” the employee said.

Hackers used a potent computer virus known as SamSam to encrypt large swaths of city data in the attack and demanded a payment of six bitcoins, worth $51,000 at the time, to release the information.

Atlanta Mayor Keisha Lance Bottoms, who took office in January, has declined to say whether the city was negotiating with the hackers.

City officials have not disclosed the extent to which its computer backup systems were corrupted or what type of data is unable to be recovered without paying the ransom.

A federal criminal investigation into the breach is under way.

Reporting by Laila Kearney in New York; Editing by Daniel Bases and Peter Cooney

Facebook says data leak hits 87 million users, widening privacy scandal

SAN FRANCISCO (Reuters) – Facebook Inc (FB.O) said on Wednesday that the personal information of up to 87 million users may have been improperly shared with political consultancy Cambridge Analytica, up from a previous news media estimate of more than 50 million.

FILE PHOTO: Silhouettes of mobile users are seen next to a screen projection of Facebook logo in this picture illustration taken March 28, 2018. REUTERS/Dado Ruvic/Illustration/File photo

Most of the 87 million people whose data was shared with Cambridge Analytica, which worked on U.S. President Donald Trump’s 2016 campaign, were in the United States, Facebook Chief Technology Officer Mike Schroepfer wrote in a blog post.

Facebook said it was taking steps to restrict the personal data available to third-party app developers. (bit.ly/2Ejpktb)

The world’s largest social media company has been hammered by investors and faces anger from users, advertisers and lawmakers after a series of scandals about fake news stories, election-meddling and privacy.

Last month, Facebook acknowledged that personal information about millions of users wrongly ended up in the hands of Cambridge Analytica.

Facebook Chief Executive Mark Zuckerberg will testify about the matter next week before the U.S. House Energy and Commerce Committee, the panel said on Wednesday.

Shares in Facebook were down 1.4 percent on Wednesday to $153.90. They are down more than 16 percent since the Cambridge Analytica scandal broke.

The previous estimate of more than 50 million Facebook users affected by the data leak came from two newspapers, the New York Times and London’s Observer, based on their investigations of Cambridge Analytica.

Schroepfer did not provide details of how Facebook came to determine its higher estimate, but he said Facebook would tell people if their information may have been improperly shared with Cambridge Analytica.

A representative from Cambridge Analytica could not immediately be reached for comment.

The British-based consultancy has denied wrongdoing. It says it engaged a university professor “in good faith” to collect Facebook data in a manner similar to how other third-party app developers have harvested personal information.

The scandal has kicked off investigations by Britain’s Information Commissioner’s Office, the U.S. Federal Trade Commission and by some 37 U.S. state attorneys general.

Nigeria’s government will investigate allegations of improper involvement by Cambridge Analytica in that country’s 2007 and 2015 elections, a presidency spokesman said on Monday.

Reporting by David Ingram; Editing by Susan Thomas and Lisa Shumaker