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, Author: Mao Gedong, reproduced by Odaily with authorization.

Text | Mao Gedong

Produced | Mars Finance APP (ID: hxcj24h)

The article "Facebook warns that Libra may not be released" was swiped in the circle of friends.

The article said that Facebook reminded investors in its latest financial report that due to many constraints, Libra, which was originally scheduled to be launched in 2020, may not be released as scheduled;

The article said that due to factors such as insufficient market acceptance and Facebook's lack of blockchain experience, Libra will also suffer negative impacts;

……

The article also said that since Libra was officially announced in June, the biggest resistance Facebook has faced has been from lawmakers and regulators.

After reading the two feelings - as a listed company, Facebook's routine risk disclosure of Libra has been artificially magnified and over-interpreted; in the age of social media, content with exaggerated titles is easier to spread, but "title party" is one thing , maliciously shorting the market is another matter.

For the Libra risk disclosed by Facebook in the financial report, the situation may not be as bad as imagined. Before understanding the real challenges facing Libra, it is necessary for us to understand the SEC's risk disclosure regulations.

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Introduction to SEC Risk Information Disclosure Regulations

Risk information disclosure is a requirement that listed companies must disclose or publish their relevant information and materials in accordance with the law in order to protect the interests of investors and accept the supervision of the public. Not only the US SEC requires listed companies to disclose risk information, but also other stock markets.

But the SEC's risk disclosure policy is stricter. It requires listed companies to disclose the business risks, corporate governance risks, policy risks, issuance risks, etc. of their related industries, in detail. In the financial reports of listed companies in the United States, detailed risk information is not uncommon.

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Interpretation of the cases of Apple, Alibaba, and Momo: Through the risk disclosure of the three major U.S. stock listed companies, see the details

In May 2019, Apple announced its new quarterly financial report. In the 46-page report, there are as many as 10 pages of risk disclosure, accounting for nearly 22% of the overall financial report. Apple mentioned in its earnings report:

"Global and regional economic conditions could have a material adverse effect on the Company's business, results of operations, financial condition and growth. Adverse macroeconomic conditions, including inflation, slowing or recessionary growth, new or increased tariffs, fiscal and monetary policies Changes in financial conditions, tightening credit, rising interest rates, high unemployment and currency fluctuations can all have a material negative impact on demand for a company's products and services."

In addition, the financial report also puts forward a total of 27 risk factors such as incentive competition in the global market, design and manufacturing defects, and global laws and regulations.

Coincidentally, Alibaba, which entered the US stock market in 2014, did not omit the link of risk disclosure when submitting documents to the SEC.

In the latest financial report released in June 2019, Alibaba conducted a detailed analysis from the aspects of industry, corporate structure, regulation and law, and American Depositary Shares (ADS). 82 risk factors including the influence of international laws and regulations.

In the financial report, Alibaba wrote: "Continued investment in our business, strategic acquisitions and investments, and our focus on long-term performance and maintaining the health of the digital economy may have a negative impact on our profits and net income. We may Unable to maintain or increase our revenue or business...”

It can be seen that for listed companies, risk disclosure is an indispensable and important part of the report.

Momo, a Chinese Internet company that also landed on the US stock market, once announced four types of risks in its financial report, with a total of 57 reminders. It not only mentioned that the company is in the early stage of monetization, the main risks such as unstable revenue and profits, and fierce market competition, but also mentioned many unimaginable detailed risks, such as "we face risks related to health epidemics and natural disasters." .

Therefore, listed companies disclose a large amount of company risk information. On the one hand, it can meet the requirements of the regulations and let investors know as much as possible the risks of investing in the company's stocks. On the other hand, it can also avoid inquiries from regulatory agencies. If these risk information are magnified and used to decide whether to invest, then there will be no stock in the stock market that can be bought-because there is no company that does not have risks.

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Facebook warns that Libra may never be released? more just routine

"Libra has come under intense scrutiny from governments and regulators in multiple jurisdictions, and we expect this scrutiny to continue. In addition, there is considerable uncertainty about the market's acceptance of this new currency. Therefore, we There can be no assurance that Libra or our related products and services will be available or will be available in a timely manner. We lack significant early experience with digital currencies or blockchain technology, which may have adverse consequences on our ability to successfully develop and market these products and services. Negative Effects."

Like Apple, Alibaba, Momo and other U.S. listed companies, Facebook’s move is also a routine risk disclosure procedure in compliance with SEC regulations. Facebook lists various risks that the Libra project may encounter, but it does not mean that these risks will definitely occur.

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Decryption: Why does Facebook have to force Libra?

Of course, as a nascent project, Libra does face many challenges.

Compared with the over-interpreted risk disclosure information of Facebook's financial report, the summary of "Fortune" magazine is more representative. It grouped the challenges facing Libra into four categories: technical issues with digital payments, user acquisition issues, mass trust issues and regulatory issues.

In terms of digital payments, Facebook said in announcing plans to launch the Calibra wallet that can use Libra: "Over time, we hope to provide people and businesses with additional services, such as paying bills with the click of a button, buying coffee with a scan code, or eliminating the need to carry cash or cash. Metro pass for public transport."

But this promise was ridiculed as "outdated" by former "Guardian" technology editor Charles. Charles pointed out that existing products such as PayPal can already meet the functions of scanning code payment and small transfers proposed by Libra.

As for user acquisition, due to the lack of awareness and inconvenient use of new products in the early stage, it is also difficult for Facebook to convert people who do not have bank accounts or even mobile phones into their own users. As for the trust of the public, Facebook has been criticized for the past two years. It has been sued in Europe for integrating user data, although the purpose is only to analyze user data and target advertisements. Since then, Facebook's advertising business has suffered an unprecedented blow.

The above three challenges are not fatal, and regulation may be the most serious challenge of all. But not only Libra, any disruptive innovation project is inevitable.

In fact, Facebook knows better than anyone the regulatory problems facing Libra, and it has been working hard to gain the trust of regulators. In an open letter released last week, Facebook founder Zuckerberg repeatedly reiterated that Libra will cooperate with regulation, promising that "both Facebook and the Libra Association plan to work with regulators to resolve all concerns before Libra's launch."

Libra is expected to be high, and Facebook will not give up on it. The reason is that Libra will be Facebook's growth engine outside of its advertising business. Revenue has slumped as Facebook's advertising business has been increasingly constrained. Libra will become more and more important.

The financial report for the second quarter of 2019 released last week showed that Facebook’s revenue exceeded US$16.8 billion, a year-on-year increase of 28%, but its net profit fell by 49% year-on-year, which was almost cut in half. The core reason is that the advertising business is affected by multiple factors such as regulatory factors, platform changes, and the impact of Facebook’s enhanced user privacy protection on advertising products, and the revenue has declined significantly.

Before regulators relax regulation and user trust is successfully rebuilt, the decline in Facebook's advertising revenue will be irreversible. Therefore, it is imminent for Facebook to develop business income other than advertising. Expansion of new payment services through Libra is currently the most important research direction.