News surfaced yesterday that a sovereign wealth fund representing the Chinese government wants to buy a substantial amount of Facebook stock. According to anonymous sources to Business Insider, China wants to own enough of Facebook “to matter.”
What does that mean? It is important to note that a sovereign wealth fund may represent a government but is not the actual government, as Business Insider reporter Nicholas Carlson points out. Is China’s interest in Facebook a simply a government-sponsored group of venture capitalists looking to get a piece of the upcoming Facebook IPO or is there something more complicated at work behind the scenes?
Sponsor
In the same report, Business Insider notes that Citibank is trying to acquire as much as $1.2 billion worth of Facebook stock on behalf of two sovereign wealth funds from China and the Middle East.
Facebook’s user demographics are 70% international, according to the company’s statistics page. China has a booming social media industry and U.S. companies are eyeing China as the next great frontier for expansion. Bloomberg reported in May that CEO Mark Zuckerberg and COO Sheryl Sandberg disagree on whether or not the company should get into China, with Sandberg believing that Facebook would have to compromise its values to enter the People’s Republic while Zuckerberg believes it could be “an agent of change” – and is likely seeing dollars signs as well.
It has been very difficult for U.S. Web companies to make a significant dent in the Chinese market. Twitter was banned in 2009 and Google has had a long, difficult road in the country. Zuckerberg has the final say when it comes to Facebook’s involvement in China and as a private company it has the choice of who gets to buy stock. Zuckerberg may be thinking that if he lets a sovereign wealth fund representing the Chinese government buy a non-voting piece of the company, the barrier for entry (and success) would be lower than it would be for other U.S. Web companies.
Facebook’s role in the Arab Spring shows that social media can be a powerful force for change. China is the global leader in Web censorship. It seems like the two entities would have a hard time existing in the same Internet space.
An inverse of Facebook in China would be the coming of Chinese micro-blogging platform Weibo to the English-speaking world. Weibo, run by Chinese corporation Sina, will continue to be self-censored even in English. Facebook would likely be asked by the Chinese government to alter its platform to provide some type of self-censoring within the country as well. If Chinese interests control $1.2 billion worth of the company (a small piece in comparison with the $100 billion valuation Facebook is expected to have upon IPO), Facebook is obligated to listen, even if the Chinese party does not have a vote on the Facebook board.
That could be what owning enough of Facebook “to matter” could mean. Enough that when the Chinese government talks, Zuckerberg is forced to listen. Censorship would likely ensue.
How far can China’s censorship reach? Is this a money grab by some motivated Chinese business people or a preemptive strike by the Chinese government to control Facebook before it can cause the same type of disruption that was part of the Arab Spring?
0 Responses
Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.