Tomahawk, WI 04/02/2014 (Basicsmedia) – While Facebook Inc (NASDAQ:FB)’s stock price has increased by 144.8% in the one year period from April 2, 2013 to April 1, 2014, it’s worth asking whether this growth is sustainable.

Facebook’s Shopping Frenzy

While Facebook’s sales have increased to $7.9 billion from $5.1 billion, at the same time the company has been on an unprecedented buying spree. Apart from buying smaller companies such as Titan Aerospace and Ascenta — for $60 million and $20 million respectively — Facebook has made a couple of multi-billion dollar acquisitions in the form of WhatsApp and Oculus VR.

Real Money in Exchange for Virtual Reality

Oculus is a manufacturer of virtual reality headsets that cost Facebook $400 million in cash and 23.1 million shares of Facebook stock. WhatsApp cost Facebook a total of $19 billion which included $3 billion in contingencies. Out of the $16 billion cost, $4 billion will be in cash and the remaining $12 billion will be in stock.

If you compare Facebook’s acquisition activity with that of Google Inc (NASDAQ:GOOG), it’s clear that Google is spending mostly the cash it generates during its normal business operations to make the purchases while Facebook is short of cash and depends on the value of its shares.

I Am The Boss

Mark Zuckerbeg, the Facebook Inc (NASDAQ:FB)’s CEO, is sitting pretty because of the dual-class share structure of Facebook which gives him controlling rights of the company and he is mostly at liberty to do as he pleases.

Will these twin Facebook acquisitions eventually work out well for Facebook like Google’s acquisitions of Android and YouTube in 2005 and 2006 respectively? But it’s worth remembering that today’s giant Google is built on the back of nearly 150 mergers and acquisitions.

The initial reaction from the game developers community to the Oculus acquisition came in the form of a swift backlash centered on privacy concerns. Privacy concerns similarly have led privacy advocates to file a complaint with the Federal Trade Commission (FTC) about the other big Facebook Inc (NASDAQ:FB) acquisition — that of WhatsApp.

In The End

Clearly, despite a billion and a quarter users of Facebook, there are plenty of skeptics around — the financial skeptics doubt if Facebook Inc (NASDAQ:FB) and Zuckerberg can deliver to justify their stratospheric market capitalization and the privacy rights skeptics who have been wary of Facebook’s intentions for some time now.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.