Facebook Stock Soars after $5.7 Billion Bet to Invade India

  • Facebook’s stock is soaring after a surprise investment in Indian telecom giant Reliance Jio.
  • The American social media company has purchased a 9.99% stake in Reliance for $5.7 billion, making this its biggest investment ever.
  • Could Facebook’s investment be the first move in a trend of American tech companies ditching the hostile Chinese market in favor of greener pastures?

Facebook’s (NASDAQ: FB) stock is soaring after a surprise investment in Reliance Jio, India’s largest telecom. The move will give the social media giant a foothold in India’s large market. And the two companies may be teaming up to develop a “super app” to rival China’s WeChat.

This comes at a time when American companies are looking to decouple from China due to rampant intellectual property theft and unfair trade practices. India, with its rapid GDP growth and large population, could offer an alternative market without all the headaches associated with investing in China.

Facebook Needs Growth

Throughout its history, Facebook has delivered some of the best top-line growth in the market. In 2019, the company generated sales of $70.7 billion, a 26.6% jump from the prior-year figure. This revenue growth is powered by an eye-watering Average Revenue Per User (ARPU) of $41.41 in the United States and Canada.

Facebook has seen a declining trend in user growth, particularly in North America and Europe. | Source: Twitter/Bloomberg

Facebook’s ARPU in the Asia-Pacific region, which includes India, is a more modest $3.57. Clearly, the region is a massive growth opportunity for the company.

Right now, Facebook’s biggest footprint in the Indian market comes from its WhatsApp user base. The app is used by 400 million Indians — more than any other country in the world. And according to India’s Economic Times, Facebook and Reliance Jio plan to work together to create a multi-purpose “super-app” that will combine social media with shopping, travel bookings, and payment…

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