Facebook Inc Snags WhatsApp

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WASHINGTON, DC — Facebook  (NASDAQ: FB.US) was making waves after hours after it scooped up messaging service WhatsApp for the whopping sum of $19 billion.


Facebook shares were down 2.7% initially on the news as investors may think that the social-network giant overpaid for the messaging app. The industry leader will pay $4 billion in cash, $12 billion in stock, and $3 billion in restricted shares that will vest over the four years for a service that counts over 450 million members, 70% of which use it everyday, and whose messaging volume is approaching the entire global SMS telecom volume.

WhatsApp is also adding 1 million members every day. Facebook will leave the WhatsApp brand intact and it will continue to operate it as a stand-alone application, and WhatsApp co-Founder Jan Koum will join Facebook’s Board of Directors.

The purchase is certainly a bold one for Facebook, but the company understands that its namesake site alone is not enough to dominate the future of social media. Just as it did with Instagram, the company is making a smart move but seizing another industry growth star. Observers can argue about the price tag, but this is the right strategy for Facebook.

While there’s no denying Facebook’s popularity among its users, as a stock it has had a volatile life since its IPO and currently doesn’t pay a dividend, either.

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> Jeremy does not own shares in Facebook.