Ask Jeffrey Gundlach what his thoughts are on Facebook (FB), and the billionaire “bond king” doesn’t mince words.
“I’ve talked about things that are safe that end up being unsafe,” Gundlach said on Wednesday during an exclusive conversation with Yahoo Finance’s Julia La Roche. “I think that’s Facebook. They sell themselves as comfortable and safe, but they’re really just a diabolical data collection monster. They’re unrepentant.”
Gundlach, who is founder and CEO of DoubleLine Capital and oversees $121 billion in assets, contends Facebook’s biggest problem is its business model, which is primarily driven by desktop and mobile ads distributed across its properties including Instagram. To that end, Facebook generated almost $55 billion in revenues during the fourth-quarter of 2018 — up 38% year-over-year — accounting for 98.5% of Facebook’s total revenues for the period.
Since the 2016 U.S. presidential election, Facebook’s business model has come under heavy fire from lawmakers and critics like Gundlach, who have questioned the company’s priorities around protecting user data and privacy.
Last March kicked off a series of back-to-back scandals for the social network, including the Cambridge Analytica controversy, in which the voter profiling company effectively harvested the data of up to 87 million Facebook users as part of an effort to elect President Donald Trump. Other controversies Facebook dealt with in 2018: more user data breaches, the publication of internal company emails and documents by UK parliament, and the hiring of Definers Public Affairs, a Republican-aligned public relations firm that conducted opposition research on the company’s critics, including billionaire George Soros.
‘I don’t trust them’
Facebook is also reportedly negotiating a multibillion-dollar record fine with the Federal Trade Commission over its privacy blunders. The two parties have yet to settle on an amount, but the fine could be the largest ever imposed on a tech company, surpassing even the $22.5 million penalty Google paid in 2012 for breaking an agreement with the government to protect user data.
Gundlach had previously recommended shorting Facebook stock in a pair trade: a move based on the view that so-called “equity bubbles” are frequently popped by regulation. Although his position was criticized by pundits, Gundlach was soon proven right when Facebook stock plunged in mid-July. The stock plunge occurred amid ongoing controversies and after the social network reported second-quarter 2018 earnings that missed revenue expectations, and revealed slowing user growth and weak guidance.
“There’s good and bad going on in the world,” Gundlach said at the Sohn Investment Conference in April 2018, while reflecting on Facebook CEO Mark Zuckerberg’s apology tour for the Cambridge Analytica scandal. “Interpretations matter.”
Gundlach, who doesn’t have a Facebook profile, reiterated his negative view of the company.
“The fact that I don’t trust them makes me not like them, and the fact that I don’t like them makes me want their stock to go down,” he explained.
Gundlach’s comments arrive on the heels of a new U.K. government report this week contending that online platforms such as Facebook, Google (GOOG, GOOGL), and Apple (AAPL) should be regulated in how they distribute news content and help users take measures to identify reliable, trustworthy news. The report’s recommendations are non-binding but will be considered by the U.K. government.
“When the regulators show up, usually the stock prices go down, like healthcare had a meteoric rise until the regulators showed up a few years ago, and then a big decline,” Gundlach added.
The bond king, who maintains a steady presence on Twitter (TWTR), acknowledged he has never used Instagram.
“I don’t know what Instagram is,” Gundlach admitted. “I’ve never downloaded an app in my life.”
[Full transcript of Jeffrey Gundlach’s extended conversation with Yahoo Finance]
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