Putting Facebook Under the Microscope Is Good News for FB Stock

Facebook (NASDAQ:FB) stock is allegedly having a tough time recruiting people to come work at the company. That’s a good thing if you own FB stock. I’ll explain why.

Putting Facebook Under the Microscope Is Good News for FB Stock

But first, a little backstory.

CNBC recently reported that it’s spoken with more than half a dozen recruiters who’ve left Facebook in 2019 about the difficult questions potential job applicants are asking the company. It seems no one wants to work for a company that cares very little about people’s privacy.

According to these recruiters, job acceptance rates at Facebook have plummeted since the Cambridge Analytica scandal broke in March 2018.

Can you blame someone for having second thoughts about working at the company?

An Opportunity for Change for FB Stock

Going to work at Facebook if privacy is sacrosanct to your beliefs is like an animal lover going to work at Canada Goose (NYSE:GOOS) or an environmentalist taking a job at Exxon Mobil (NYSE:XOM).

Betray people’s trust and you are going to get put under the microscope.

However, owners of FB stock shouldn’t view the alleged inability of Facebook to attract the best talent as a problem. Instead, they ought to see this as an opportunity for the company to chart a new course. This new trajectory should lead to even higher acceptance rates than is historically its norm.

The recruiters who CNBC spoke to suggest that the acceptance rates from job offers to new grads at top schools such as Stanford and Carnegie Mellon have fallen from 85% before the scandal to between 35% and 55% after.

Software engineers, the backbone for every tech company, have seen acceptance rates drop approximately 40% in 2019.

Naturally, Facebook’s trying to spin this in the most positive way possible.

All’s Good at Facebook, So They Say

Spokesperson Anthony Harrison says the company’s headcount in the first quarter of 2019 increased 36% year-over-year. Facebook is hiring like the dickens. Furthermore, the recruiters’ figures are inaccurate, Harrison suggests.

“Facebook regularly ranks high on industry lists of most attractive employers,” Harrison said in a statement. “For example, in the last year we were rated as #1 on Indeed’s Top Rated Workplaces, #2 on LinkedIn’s Top Companies, and #7 on Glassdoor’s Best Places to Work.”

Now, if you own Facebook stock, I would be concerned about Harrison’s take on the matter. His comments appear to show minimal comprehension or sensitivity to the fact that prospective employees are worried about the level of trust between themselves and their future employer.

As a shareholder, wouldn’t you want job candidates to ask Facebook’s management team tough questions? Especially since privacy issues have plagued the company and the FB stock price.

I sure would.

“The biggest thing that impacted people at Facebook is that we found out information at the same time as the general public did,” one recruiter who left recently said. “It was like, ‘Wait, shouldn’t one of our leaders have told us about this first versus our parents or friends reaching out?’ It was a shock.”

Kudos to CNBC for publishing this story.

Facebook shareholders deserve to know that CEO Mark Zuckerberg and COO Sheryl Sandberg and the rest of its upper management haven’t fully come to grips with the seriousness of the privacy issue.

Furthermore, it appears by Harrison’s comments that it hasn’t adjusted its macro view of the world. It still thinks its poop doesn’t stink.

College grads might be burdened with a ton of debt. But they’re wise enough to know when a situation isn’t worth the trouble no matter the remuneration.

The Bottom Line on FB Stock

In February, I called FB stock a buy, arguing that although it had many problems, leadership wasn’t one of them. These allegations, if true, bring my opinion squarely into question.

The only thing that’s going to get Facebook fully out of the doghouse among new grads is honesty and integrity: to the public, its advertisers, the government, its shareholders, and most importantly its employees.

What doesn’t kill you makes you stronger. The Facebook stock price can actually benefit from the underlying company receiving sharp scrutiny. However, this requires acknowledgement that the privacy scandals have negatively impacted recruitment. If you own FB stock, embrace management’s feet being held over the fire. It’s the only way a company’s culture can change for the better. And change it must.

I still think Facebook stock is a buy. However, I’ll be following this story more closely to see if a leopard can change its spots.

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2019/05/putting-facebook-under-microscope-is-good-news-for-facebook-stock/.

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