Time to sell Facebook?

[hog.goblin]

From Bloomberg:

(Bloomberg) Facebook Inc.'s future cash flows and results could suffer a major blow if it loses a battle over new U.S. tax liabilities related to the transfer of its global operations to Ireland in 2010.

The Internal Revenue Service delivered a notice of deficiency to the social media giant Wednesday for $3 billion to $5 billion, plus interest and penalties, based on the agency's audit of Facebook's transfer pricing, the company said in a regulatory filing Thursday. Facebook, which plans to challenge the notice in federal tax court, said its balance sheet could suffer if it's held liable.

Facebook said in the filing that the liability "could have a material adverse impact" on its finances, results or cash flows. "In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain."

However, since mid-July it's up 14.6% in in the last three months it's up about 5%.  Older than that and the graph is fantastic.

However, it's a company that earned $6 Billion dollars before taxes.  Even if it pays out $5 Billion to make all this go away, it shouldn't hurt the long-term health of the company.  One could argue that the taxes will be going up now that they are in compliance, but looking at their 2015 financial statements they are reporting a 40.4% tax rate as of now anyway.  It can't go much higher.

It sounds like to me if you own it, keep it.  If you are looking to buy it, wait and see if there is a dip once a settlement is reached.

[ricepig]

I'm considering selling 1/3-1/2 of mine, just because it's been such a good run the last five years. This might be the excuse I need.

[hog.goblin]

I'm considering selling 1/3-1/2 of mine, just because it's been such a good run the last five years. This might be the excuse I need.

Wouldn't blame you one bit

[ricepig]

Wouldn't blame you one bit

I wish it had been a bigger investment, but as my old commodity trading broker told me, "you can't go broke taking a profit". I've got loser or two I need to shed anyway, good chance to offset some.

[hawgrunner]

going to wait to buy.

[HawgWild]

Stupid me, I was waiting for FB to drop to $15 when it fell after it's IPO before picking up some. It never made it and I never bought. About the same time HiM was touting CHK. "The ship was sailing" or something like that he was saying. The tale of two stocks.

[ricepig]

Stupid me, I was waiting for FB to drop to $15 when it fell after it's IPO before picking up some. It never made it and I never bought. About the same time HiM was touting CHK. "The ship was sailing" or something like that he was saying. The tale of two stocks.

Lol, you can get CHK for a bargain now! I'm more inclined to buy CHK, than FB at this juncture. And I agree on thinking there would be a better chance to buy it, I never got in as much as I had allocated in my portfolio, but glad I bought what I did..

[je100]

Love Facebook long term, like the next decade.  It's the only stock that I currently own.

http://seekingalpha.com/article/3998656-facebook-seen-tip-iceberg

[hog.goblin]

(Bloomberg) Facebook Inc. officials failed to show up after getting seven summonses from the Internal Revenue Service demanding internal corporate records on one of its offshore tax strategies, according to an IRS court filing.

[je100]

(Bloomberg) Facebook Inc. officials failed to show up after getting seven summonses from the Internal Revenue Service demanding internal corporate records on one of its offshore tax strategies, according to an IRS court filing.

Interesting.  Not seeing any numbers yet....

[hog.goblin]

Well, Apple got nailed on a similar issue.  Interesting the price is down less than a $1 on $15B plus in back taxes and interest.  I was hoping for a bigger drop so I could buy some.  Might still have a chance of course.

Will make things more interest for Facebook.

(Bloomberg) On Tuesday, Apple was ordered to repay as much as 13 billion euros ($14.5 billion) plus interest after the European Commission said Ireland illegally slashed the iPhone maker's tax bill between 2003-2014.

The commission ruled that Ireland provided Apple illegal aid through a favorable tax arrangement, which violated the European Union's state-aid rules. It's the largest tax penalty in a three-year crackdown on sweetheart fiscal deals granted to multinationals by EU nations. The EU, like other global regulators, has targeted firms that sidestep taxes by moving around profits and costs to wherever they are taxed most advantageously -- exploiting loopholes or special deals granted by friendly governments.

[je100]

Apple's deferred tax bill was an accumulation of evasion over a period of 11 years.  I don't know when FB began to turn profits (2011 maybe?), but it hasn't been that long ago.  My best guess at this point is that FB will also get smacked, but it will have a far less impact on them than it did on Apple.

[hog.goblin]

Apple's deferred tax bill was an accumulation of evasion over a period of 11 years.  I don't know when FB began to turn profits (2011 maybe?), but it hasn't been that long ago.  My best guess at this point is that FB will also get smacked, but it will have a far less impact on them than it did on Apple.

I tend to agree