Facebook has lost $60 billion in value

Facebook is having a bad day… for the second day in a row. Following the Cambridge Analytica debacle, Facebook shares (NASDAQ:FB) are currently trading at $164.07, down 4.9 percent compared to yesterday’s closing price of $172.56.

More importantly, if you look at Monday and Tuesday combined, Facebook shares are down 11.4 percent compared to Friday’s closing price of $185.09. In other words, Facebook was worth $537.69 billion on Friday evening when it comes to market capitalization. And Facebook is now worth $476.83 billion.

That’s how you lose $60 billion in market cap.

Senate Intel Committee gives Homeland Security its election security wish list

In a press conference today, the Senate Select Committee on Intelligence presented its urgent recommendations for protecting election systems as the U.S. moves toward midterm elections later this year.

“Currently we have an election upon us, and the past tells us that the future will probably hold another set of threats if we are not prepared,” Senator Kamala Harris said.

The bipartisan committee offered a set of measures to defend domestic election infrastructure against hostile foreign nations.

Before launching into the findings from its committee-wide examination of current practices, written up in an accompanying report, the group emphasized that states are “firmly in the lead” in conducting elections, although the federal government should work closely to provide funds and information.

Although there are many factors that can mitigate the risk to U.S. elections, election equipment itself, particularly internet-connected systems, remains a core concern in the report:

“States should rapidly replace outdated and vulnerable voting systems. At a minimum, any machine purchased going forward should have a voter-verified paper trail and no WiFi capability. If use of paper ballots becomes more widespread, election officials should re-examine current practices for securing the chain of custody of all paper ballots and verify no opportunities exist for the introduction of fraudulent votes.”

Because financial need varies from state to state, the committee recommended legislation that would create a grant program through which states could apply for election security funds, including the funding needed to conduct system audits.

“States should use grant funds to improve cybersecurity by hiring additional Information Technology staff, updating software, and contracting vendors to provide cybersecurity services, among other steps,” the report states.

The rest of the report focused on how to bolster U.S. election infrastructure and practice against foreign attacks. Now that the potential vulnerability of U.S. election systems is widely known, Russia may not be the only adversary looking to poke holes in U.S. systems.

“It may not be the Russians next time,” Sen. James Lankford said. “They have set a pattern that others could follow.” That means that Iran, North Korea or even domestic hacktivist groups could be following along.

The committee recommends that the U.S. work with allied countries to create international cyber standards to deter hostile nations from taking advantage of current gray areas in cyber policy, making it clear that attacks on election systems are “hostile acts.”

“We need a more transparent cyber doctrine so that other nation-states are on notice,” New Mexico Senator Martin Heinrich said.

The committee made multiple mentions of the Department of Homeland Security’s failure to coordinate with states — and state-level distrust of that department — during the 2016 election. In the past, information sharing between federal and state officials has been hampered by slow processes for obtaining the proper security clearances for state and local election workers.

“The Intelligence Community should work to declassify information quickly, whenever possible, to provide warning to appropriate state and local officials,” the report states.

States also lag behind when it comes to knowledge and implementation of basic cybersecurity best practices like two-factor authentication. The committee urges DHS to work to educate the states to establish a set of best practices to mitigate risk.

Tomorrow, the committee will have a chance to hand their wish list over in person. Homeland Secretary Kirstjen Nielsen will appear in the first of a three-panel hearing, alongside Obama-era secretary Jeh Johnson who oversaw the department during the 2016 election.

FTC reportedly eyes probe of Facebook over data violations as UK and US pols summon Zuck to testify

The fallout from the story concerning Facebook, Cambridge Analytica, the misuse of personal data and how much Facebook knew about all this, has quickly made its way into the halls of government.

Bloomberg is reporting that the Federal Trade Commission is opening a probe into Facebook and the misuse of personal data, related to a consent decree that was issued in 2011 over the social network’s personal data handling policies.

Also today, Damian Collins, a member of parliament who is the chair of the Department of Culture, Media and Sport select committee in the UK, has issued a request to Facebook CEO Mark Zuckerberg to provide oral evidence to the committee. Meanwhile, Mark Warner, the U.S. Senator who is vice chair of the Intelligence Committee, has also requested that Zuckerberg, along with other tech CEOs, testify in order to answer questions about Facebook’s role in “social manipulation” in the 2016 election.

The FTC has not yet responded to our requests for comment, and it has not publicly confirmed if it is probing Facebook. The original decree was made as a settlement to an inquiry at the time into how Facebook — then just a startup but growing wildly fast — “deceived consumers by telling them they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public,” and it arose specifically in relation to how third-party apps were able to use and access this data. This is key because the original survey that users filled out was, in fact, an app of sorts, linking into Facebook by way of its API.

The idea behind the FTC settlement in 2011 was to ensure that Facebook made its privacy and data handling policies clear to consumers going forward, and to get their “express consent” before information is shared beyond the privacy settings those users established.

Specific details of the 2011 decree included barring Facebook from making misrepresentations about privacy and security of personal information; getting user consent before making change that override privacy preferences; preventing material to be shared after an account was deleted or deactivated; and maintaining a privacy program assessing risks and getting this audited every two years.

The decree also notes that it will terminate 20 years from the date of being issued, but that it will renew for another 20 years each time that the FTC files a complaint over any violations — meaning, if the FTC does file a complaint and is successful in determining the violation, it will prolong Facebook’s own need to report and make clear privacy policies to its users.

Committees call on Zuck to speak for the company.

Warner’s public call for Zuckerberg to speak, delivered earlier this morning by way of a Tweet, was not the first time that the Intel Committee has requested Zuckerberg to testify: it had also invited him to the original hearing in November of last year, where lawyers were sent instead.

Meanwhile, Collins’ invitation also comes in the wake of other requests for top Facebook executives, for hearings that the DCMS has held both in London and, just weeks ago, in Washington in an attempt to attract more senior executives to participate.

“The Committtee has repeatedly asked Facebook about how companies acquire and hold on to user data from their site, and in particular about whether data had been taken without their consent,” Collins writes in his letter. “Your officials’ answers have consistently understated this risk, and have been misleading to the Committee. It is now time to hear from a senior Facebook executive with the sufficient authority to give an accurate account of this catastrophic failure of process.”

Indeed, the thinking now seems to be that the increased attention, and the revelations in the media, will now force Facebook’s hand a bit more than before.

The summons to give evidence before the parliamentary committee or Congress are not legally binding, but they are significant for other reasons.

For one, they provide a moment to hear Zuckerberg give live responses to questions as they are presented to him: up to now, a lot of what we’ve heard from the CEO on the subject of Facebook and its position in the wider issue of elections, fake news and the use of social media help achieve certain outcomes, has largely come in the form of long Facebook posts by him, with little in the way of dialogue (which is in itself a little ironic when you consider the whole point of Facebook is supposed to be about engagement).

While there are no direct legal ramifications for testifying, what it does do is provide more evidence for lawmakers. At a time when we have relatively light regulation for social media and how it handles data in the US, this could become a critical moment where we may start to see more calls and efforts to start to regulate this area of digital media more carefully.

A third reason why testifying is notable is because of the optics: for a lot of people who do not understand and care much about the intricacies of how social networks handle their data, this could bring new light to the topic, on both sides of the table. Perhaps especially important for Zuckerberg if he’s truly considering a run for public office sometime in the future, as some have reported.

Government agencies react to Uber’s fatal self-driving car accident

Earlier today, news broke of a fatal crash involving one of Uber’s self-driving cars in Tempe, Arizona. In response, Uber halted its self-driving car programs where it currently operates, including in Pittsburgh, Toronto, San Francisco and Phoenix. The U.S. Department of Transportation National Highway Traffic Safety Administration, Tempe Mayor Mark Mitchell and others have since released statements about the crash.

In a statement to TechCrunch, the NHTSA said it has sent over its “Special Crash Investigation” team to Temple. This is “consistent with NHTSA’s vigilant oversight and authority over the safety of all motor vehicles and equipment, including automated technologies,” a spokesperson for the agency told TechCrunch.

“NHTSA is also in contact with Uber, Volvo, Federal, State and local authorities regarding the incident,” the spokesperson said. “The agency will review the information and proceed as warranted.”

Over in Tempe, Mitchell called the accident “tragic,” saying the city grieves for Elaine Herzberg, the woman who lost her life.

“The City of Tempe has been supportive of autonomous vehicle testing because of the innovation and promise the technology may offer in many areas, including transportation options for disabled residents and seniors,” Mayor Mitchell said in a statement. “All indications we have had in the past show that traffic laws are being obeyed by the companies testing here.”

Moving forward, the city of Tempe and its police department will look into the accident to try to figure out what happened, Mitchell said. In the meantime, Mitchell said he supports the step Uber has taken to temporarily suspend its self-driving tests.

Over in California, where Uber has also suspended its self-driving car tests, the DMV says it “takes the safe operation of our autonomous vehicle permit holders very seriously,” a DMV spokesperson said in a statement to TechCrunch.

“The California DMV has many requirements in place for testing permit holders and requires collision reports and annual disengagement reports,” the spokesperson said. “We are aware of the Uber crash in Arizona, but we have not been briefed on the details of the crash at this time. We plan to follow up with Uber to get more information.”

Assemblymember Jim Frazier (D-Discovery Bay), who is also chairman of the Assembly Transportation Committee, also chimed in, saying his “heart goes out to the family of the victim.”

He added,

Unlike Arizona, California has taken a safety driven approach when developing autonomous vehicle regulations. Autonomous vehicles have the potential to save thousands of lives a year, but they have to be tested properly to protect the public. My Committee plans on having a hearing in May that will focus on the safety of these vehicles.

Earlier today, the National Safety Transportation Board announced it would conduct its own field investigation. That came after Uber’s statement, in which the company expressed its condolences and said the company is working with local authorities in their investigation.

I’ll update this story as I learn more.

Tech industry comes out swinging against potential Trump tariffs

Over the weekend, the Information Technology Industry Council and 44 other trade associations banded together and published a letter demanding that the Trump administration take “measured” steps to stop China’s unfair trade practices and voiced its opposition to unilateral tariffs that could damage industries as diverse as electronics and agriculture.

As we have been covering on TechCrunch, the Trump administration is readying a comprehensive “all of the above” series of policies to fight China, including tariffs that might reach above $100 billion, visa restrictions on Chinese nationals, and prohibitions on Chinese capital from buying or investing in American companies. The Trump administration is expected to develop a policy here shortly as part of the conclusion of its section 301 trade investigation into China.

The letter warns that tariffs in particular could lead to “a chain reaction of negative consequences for the U.S. economy, provoking retaliation; stifling U.S. agriculture, goods, and services exports; and raising costs for businesses and consumers.”

Interestingly, the letter leaves open the door for tariffs. From the letter:

In particular, it is critically important that the Administration work with like-minded partners to address common concerns with China’s trade and investment policies. Imposition of unilateral tariffs by the Administration would only serve to split the United States from its allies, hinder joint action to effectively address shared challenges, and ensure that foreign companies take the place of markets that American companies, farmers and ranchers must vacate when China retaliates against U.S. tariffs.

Considering the wide variety of organizations that signed onto this letter, it is interesting to note that free trade arguments are not being used here forcefully, but rather that the United States should only implement trade restrictions with the cooperation of other nations.

The letter from the trade association in many ways mirrors a letter released by House Republicans two weeks ago that similarly urged the administration against imposing unilateral tariffs on aluminum and steel, tariffs that the Trump administration had already announced that it is implementing.

Outside ITI, the signatories of the trade association letter included a spate of tech industry-affiliated associations, including Allied for Startups, CompTIA, the Computer and Communications Industry Association, the Consumer Technology Association, the Developers Alliance, the Internet Association, the Software & Information Industry Association, TechNet, and the Telecommunications Industry Association.

Trump bans Venezuelan cryptocurrency in the US

U.S. President Donald Trump has issued an executive order to ban Petro in the U.S. Petro is a cryptocurrency developed by the government of Venezuela.

As of today, U.S. citizens, residents and companies can’t buy or sell Petro. The executive order says that Venezuelan President Nicolás Maduro is trying to avoid U.S. sanctions against Venezuela with this new cryptocurrency. The U.S. Treasury Department already warned U.S. investors back in January.

Maduro first unveiled the country’s cryptocurrency in December. He said that Petro would be backed by oil and mineral reserves. But the issue is that the Venezuelan government unilateraly fixes the price of the Petro. So Maduro can say Petro tokens aren’t worth anything in a year without any consequence.

While the government has published multiple whitepapers, it’s still unclear if Petro is based on the Ethereum blockchain or NEM blockchain. But it didn’t stop them from raising hundreds of millions of dollars during the pre-sale. Venezuela’s National Assembly has also deemed Petro illegal.

Venezuela currently faces an economic collapse combined with hyperinflation. The bolívar fuerte, the country’s currency, is now worth 10,000 times less than its value in August 2012.

So turning to cryptocurrencies could be a smart move when your bank notes aren’t worth anything. But it doesn’t solve the core of the issue.

Disclosure: I own small amounts of various cryptocurrencies.

Facebook shares drop 4.4 percent following Cambridge Analytica debacle

Facebook has been at the center of a hectic debate about Cambridge Analytica and the company’s improper use of Facebook data. As a result, Facebook shares (NASDAQ:FB) opened at $177.01, down 4.4 percent compared to Friday’s closing price of $185.09.

Share prices are still going down after the opening bell. NASDAQ as a whole is more or less flat — the stock market opened down 0.1 percent.

On Thursday, Facebook suspended Cambridge Analytica from its platform. The political data analytics used Facebook data to help Donald Trump’s presidential campaign.

The main issue is that the company developed an app called an app called “thisisyourdigitallife” to harvest user data. While many people thought they were downloading a fairly harmless personality quiz app, Cambridge Analytica was using Facebook’s API to gather data about the users of this app, but also the friends of the users.

While Facebook shut down the API that gave friends’ data to apps last year, it’s already too late. Developers have improperly used Facebook’s API to influence elections.

That’s why many people think regulation on tech companies is now inevitable, which could hurt Facebook’s bottom line.

Facebook and the endless string of worst-case scenarios

Facebook has naively put its faith in humanity and repeatedly been abused, exploited, and proven either negligent or complicit. The company routinely ignores or downplays the worst-case scenarios, idealistically building products without the necessary safeguards, and then drags its feet to admit the extent of the problems.

This approach, willful or not, has led to its latest scandal, where a previously available API for app developers was harnessed by Trump and Brexit Leave campaign technology provider Cambridge Analytica to pull not just the profile data of 270,000 app users who gave express permission, but of 50 million of those people’s unwitting friends.

Facebook famously changed its motto in 2014 from “Move fast and break things” to “Move fast with stable infra” aka ‘infrastructure’. But all that’s meant is that Facebook’s products function as coded even at enormous scale, not that they’re built any slower or with more caution for how they could be weaponized. Facebook’s platform iconography above captures how it only sees the wrench, then gets shocked by the lightning on the other end.

Sometimes the abuse is natural and emergent, as when people grow envious and insecure from following the highlights of their peers’ lives through the News Feed that was meant to bring people together. Sometimes the abuse is malicious and opportunistic, as it was when Cambridge Analytica used an API designed to help people recommend relevant job openings to friends to purposefully harvest data that populated psychographic profiles of voters so they could be swayed with targeted messaging.

NEW YORK, NY – SEPTEMBER 19: CEO of Cambridge Analytica Alexander Nix speaks at the 2016 Concordia Summit – Day 1 at Grand Hyatt New York on September 19, 2016 in New York City. (Photo by Bryan Bedder/Getty Images for Concordia Summit)

Whether it doesn’t see the disasters coming, makes a calculated gamble that the growth or mission benefits of something will far outweigh the risks, or purposefully makes a dangerous decision while obscuring the consequences, Facebook is responsible for its significant shortcomings. The company has historically cut corners in pursuit of ubiquity that left it, potentially knowingly, vulnerable to exploitation.

And increasingly, Facebook is going to lengths to fight the news cycle surrounding its controversies instead of owning up early and getting to work. Facebook knew about Cambridge Analytica’s data policy violations since at least August 2016, but did nothing but send a legal notice to delete the information.It only suspended the Facebook accounts of Cambridge Analytica and other guilty parties and announced the move this week in hopes of muting forthcoming New York Times and Guardian articles about the issue (articles which it also tried to prevent from running via legal threats.) And since, representatives of the company have quibbled with reporters over Twitter, describing the data misuse as a “breach” instead explaining why it didn’t inform the public about it for years.

“I have more fear in my life that we aren’t going to maximize the opportunity that we have than that we mess something up” Zuckerberg said at a Facebook’s Social Good Forum event in November. Perhaps it’s time for that fear to shift towards ‘what could go wrong’, not just for Zuck, but the leaders of all of today’s tech titans.

Facebook CEO mark Zuckerberg

An Abridged List Of Facebook’s Unforeseen Consequences

Here’s an incomplete list of the massive negative consequences and specific abuses that stem from Facebook’s idealistic product development process:

  • Engagement Ranked Feed = Sensationalized Fake News – Facebook built the News Feed to show the most relevant content first so we’d see the most interesting things going on with our closest friends, but measured that relevance largely based on what people commented on, liked, clicked, shared, and watched. All of those activities are stoked by sensationalist fake new stories, allowing slews of them to go viral while their authors earned ad revenue and financed their operations with ad views delivered by Facebook referral traffic. Facebook downplayed the problem until it finally fessed up and is now scrambling to fight fake news.
  • Engagement Priced Ad Auctions = Polarizing Ads – Facebook gives a discount to ads that are engaging so as to incentivize businesses to produce marketing materials that don’t bore or annoy users such that they close the social network. But the Trump campaign designed purposefully divisive and polarizing ads that would engage a niche base of his supporters to try to score cheaper ad clicks and more free viral sharing of those ads.
  • Academic Research = Emotion Tampering – Facebook allows teams of internal and external researchers to conduct studies on its users in hopes of producing academic breakthroughs in sociology. But in some cases these studies have moved from observation into quietly interfering with the mental conditions of Facebookers. In 2012, Facebook data science team members manipulated the number of emotionally positive or negative posts in the feeds of 689,000 users and then studied their subsequent status updates to see if emotion was contagious. Facebook published the research, failing to foresee the huge uproar that ensued when the public learned that some users, including emotionally vulnerable teenagers who could have been suffering from depression, were deliberately shown sadder posts.
  • Ethnic Affinity Ad Targeting = Racist Exclusion – Facebook’s ad system previously let businesses target users in “ethnic affinity” groups such as “African-American” or “Hispanic” based on their in-app behavior as a stand in for racial targeting. The idea was likely to help businesses find customers interested in their products, but the tool was shown to allow exclusion of certain ethnic affinity groups in ways that could be used to exclude them from legally protected opportunities such as housing; employment, and loans. Facebook has since disabled this kind of targeting while investigates the situation.

    Exclusionary ethnic affinity ad targeting, as spotted by ProPublica

  • App Platform = Game Spam – One of Facebook’s earliest encounters with unforeseen consequences came in 2009 and 2010 after it launched its app platform. The company expected developers to build helpful utilities that could go viral thanks to special, sometimes automatic posts to the News Feed. But game developers seized on the platform and its viral growth channels, spawning companies like Zynga that turned optimizing News Feed game spam into a science. The constant invites to join games in order to help a friend win overwhelmed the feed, threatening to drown out legitimate communication and ruin the experience for non-gamers until Facebook shut down the viral growth channels, cratering many of the game developers.
  • Real Name Policy = Enabling Stalkers – For years, Facebook strictly required to use their real names in order to reduce uncivility and bullying facilitated by hiding behind anonymity. But victims of stalking, domestic violence, and hate crimes argued that their abusers could use Facebook to track them down and harass them. Only after mounting criticism from the transgender community and others did Facebook slightly relax the policy in 2015, though some still find it onerous to set up a pseudonym on Facebook and dangerous to network without one.
  • Self-Serve Ads = Objectionable Ads – To earn money efficiently, Facebook lets people buy ads through its apps without ever talking to a sales representative. But the self-serve ads interface has been repeatedly shown to used nefariously. ProPublica found businesses could target those who followed objectionable user-generated Pages and interests such as “jew haters” and other disturbing keywords on Facebook. And Russian political operatives famously used Facebook ads to spread divisive memes in the United States and pit people against each other and promote distrust between citizens. Facebook is only now shutting down long-tail user-generated ad targeting parameters, hiring more ad moderators, and requiring more thorough political ad buyer documentation.
  • Developer Data Access = Data Abuse – Most recently, Facebook has found its trust in app developers misplaced. For years it offered an API that allowed app makers to pull robust profile data on their users and somewhat limited info about their friends to make personalized products. For example, one could show which bands your friends Like so you’d know who to invite to a concert. But Facebook lacked strong enforcement mechanisms for its policy that prevented developers from sharing or selling that data to others. Now the public is learning that Cambridge Analytica’s trick of turning 270,000 users of Dr. Aleksandr Kogan’s personality quiz app into info about 50 million people illicitly powered psychographic profiles that helped Trump and Brexit pinpoint their campaign messages. It’s quite likely that other developers have violated Facebook’s flimsy policies against storing, selling, or sharing user data they’ve collected, and more reports of misuse will emerge.

Each time, Facebook built tools with rosy expectations, only to negligently leave the safety off and see worst-case scenarios arise. In October, Zuckerberg already asked for forgiveness, but the public wants change.

Trading Kool-Aid For Contrarians

The desire to avoid censorship or partisanship or inefficiency is no excuse. Perhaps people are so addicted to Facebook that no backlash will pry them their feeds. But Facebook can’t treat this as merely a PR problem, a distraction from the fun work of building new social features, unless its employees are ready to shoulder the blame for the erosion of society. Each scandal further proves it can’t police itself, inviting government regulation that could gum up its business. Members of congress are already calling on Zuckerberg to testify.

Yet even with all of the public backlash and calls for regulation, Facebook still seems to lack or ignore the cynics and diverse voices who might foresee how its products could be perverted or were conceptualized foolishly in the first place. Having more minorities and contrarians on the teams that conceive its products could nip troubles in the bud before they blossom.

“The saying goes that optimists tend to be successful and pessimists tend to be right” Zuckerberg explained at the November forum. “If you think something is going to be terrible and it is going to fail, then you are going to look for the data points that prove you right and you will find them. That is what pessimists do. But if you think that something is possible, then you are going to try to find a way to make it work. And even when you make mistakes along the way and even when people doubt you, you are going to keep pushing until you find a way to make it happen.”

Zuckerberg speaks at Facebook’s Social Good Forum

That quote takes on new light given Facebook’s history. The company must promote a culture where pessimists can speak up without reprise. Where a seeking a raise, reaching milestones, avoiding culpability, or a desire to avoid rocking the Kool-Aid boat don’t stifle discussion of a product’s potential hazards. Facebook’s can-do hacker culture that codes with caution to the wind, that asks for forgiveness instead of permission, is failing to scale to the responsibility of being a two billion user communications institution.

And our species is failing to scale to that level of digital congregation too, stymied by our insecurity and greed. Whether someone is demeaning themselves for not having as glamorous of a vacation as their acquaintances, or seizing the world’s megaphone to spew lies in hopes of impeding democracy, we’ve proven incapable of safe social networking.

That’s why we’re relying on Facebook and the other social networks to change, and why it’s so catastrophic when they miss the festering problems, ignore the calls for reform, or try to hide their complicity. To connect the world, Facebook must foresee its ugliness and proactively rise against it.

For more on Facebook’s non-stop scandals, check out these TechCrunch feature pieces:

Facebook’s latest privacy debacle stirs up more regulatory interest from lawmakers

Facebook’s late Friday disclosure that a data analytics company with ties to the Trump campaign improperly obtained — and then failed to destroy — the private data of 50 million users is generating more unwanted attention from politicians, some of whom were already beating the drums of regulation in the company’s direction.

On Saturday morning, Facebook dove into the semantics of its disclosure, arguing against wording in the New York Times story the company was attempting to get out in front of that referred to the incident as a breach. Most of this happened on the Twitter account of Facebook chief security officer Alex Stamos before Stamos took down his tweets and the gist of the conversation made its way into an update to Facebook’s official post.

“People knowingly provided their information, no systems were infiltrated, and no passwords or sensitive pieces of information were stolen or hacked,” the added language argued.

While the language is up for debate, lawmakers don’t appear to be looking kindly on Facebook’s arguably legitimate effort to sidestep data breach notification laws that, were this a proper hack, could have required the company to disclose that it lost track of the data of 50 million users, only 270,000 of which consented to data sharing to the third party app involved. (In April of 2015, Facebook changed its policy, shutting down the API that shared friends data with third-party Facebook apps that they did not consent to sharing in the first place.)

While most lawmakers and politicians haven’t crafted formal statements yet (expect a landslide of those on Monday), a few are weighing in. Minnesota Senator Amy Klobuchar calling for Facebook’s chief executive — and not just its counsel — to appear before the Senate Judiciary committee.

Senator Mark Warner, a prominent figure in tech’s role in enabling Russian interference in the 2016 U.S. election, used the incident to call attention to a piece of bipartisan legislation called the Honest Ads Act, designed to “prevent foreign interference in future elections and improve the transparency of online political advertisements.”

“This is more evidence that the online political advertising market is essentially the Wild West,” Warner said in a statement. “Whether it’s allowing Russians to purchase political ads, or extensive micro-targeting based on ill-gotten user data, it’s clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency.”

That call for transparency was echoed Saturday by Massachusetts Attorney General Maura Healey who announced that her office would be launching an investigation into the situation. “Massachusetts residents deserve answers immediately from Facebook and Cambridge Analytica,” Healey tweeted. TechCrunch has reached out to Healey’s office for additional information.

On Cambridge Analytica’s side, it looks possible that the company may have violated Federal Election Commission laws forbidding foreign participation in domestic U.S. elections. The FEC enforces a “broad prohibition on foreign national activity in connection with elections in the United States.”

“Now is a time of reckoning for all tech and internet companies to truly consider their impact on democracies worldwide,” said Nuala O’Connor, President of the Center for Democracy & Technology. “Internet users in the U.S. are left incredibly vulnerable to this sort of abuse because of the lack of comprehensive data protection and privacy laws, which leaves this data unprotected.”

Just what lawmakers intend to do about big tech’s latest privacy debacle will be more clear come Monday, but the chorus calling for regulation is likely to grow louder from here on out.

Qualcomm’s war may be over, but the casualties are just starting to be calculated

The epic battle between Qualcomm and Broadcom seems to have reached its armistice, with President Trump using the power of CFIUS to block the transaction this past week, ending what would have been the largest tech M&A transaction of all time.

It may be all quiet on the semiconductor front, but Qualcomm and Broadcom will now need to find a path forward to win the peace and secure access to the coming 5G wireless market. Qualcomm faces a daunting number of challenges, including a potential takeover battle waged by the spurned son of its founder. Broadcom will have to find a new path to use acquisitions to continue its growth.

As with any war though, the damage from this conflict isn’t exclusive to the two enemy combatants. The future of corporate governance and shareholder autonomy is now being reevaluated in light of the actions used by Qualcomm in its defense against Broadcom’s hostile takeover. In addition, America’s openness to foreign investment is increasingly under scrutiny.

Qualcomm picks up the pieces

Hostile takeovers are always going to be damaging affairs, no matter the outcome. The most important mandate for any board of directors — and particularly for the boards of technology companies — is to identify long-term threats and opportunities facing a company, and guide the executive team toward the best possible outcome for shareholders. Hostile takeovers are firefighting affairs — the discussions of the board are jolted from roadmaps, strategy, and vision to the minute-by-minute tactics of defending the company from marauding invaders.

Qualcomm should be directing its attention to strategy, but it faces additional wars on nearly every front. It’s fighting shareholders for its future, fighting Apple and Huawei over its revenues, fighting China over its acquisition of NXP, and now potentially fighting its founder’s son from a private takeover attempt.

Many of Qualcomm’s shareholders see the company’s performance as disappointing. While its stock has fluctuated over the past six years, today’s share price is essentially flat from where it stood in January of 2012. Compare that to Broadcom, which in the same timeframe has seen an increase of about 740%, and the PHLX Semiconductor Sector index, a basket index of the industry, which has seen its value increase by about 280%.

Unsurprisingly, shareholders were enticed by the opportunity to suddenly realize a 35% premium on their shares with Broadcom’s $82-a-share offer. Unlike Qualcomm’s board, shareholders were very interested in accepting Broadcom’s offer. In fact, we now know that Qualcomm’s board knew that it has lost the battle against Broadcom with its own shareholders during the acquisition process. As Bloomberg reported this week:

The votes started to come in on Friday, March 2. By Sunday it was clear that Qualcomm’s defense had failed.

Four of the six directors Broadcom had nominated were polling so far ahead of their Qualcomm peers that the race was effectively over, according to data viewed by Bloomberg. The remaining two were winning by less substantial margins. Making it worse, Mollenkopf and Jacobs, the architects of Qualcomm’s standalone plan, had received some of the fewest votes.

Inside the Qualcomm camp, the mood was bleak; assuming the trend continued, the board would lose control of the company at the shareholder meeting.

Broadcom’s message was one of quiet confidence. The company knew it had won, one person close to the discussions said. At that point, the person said, it was just a question of by how many votes, and who was going to leave the board.

Broadcom was winning the battle with shareholders, so Qualcomm’s board shifted to a terrain far more favorable to it: Washington bureaucrats. From the same Bloomberg report, “Federal lobbying disclosures for 2017 showing that Qualcomm spent $8.3 million, or roughly 100 times the $85,000 Broadcom spent…” These weren’t regulators; these were friends.

In late January, Qualcomm’s board submitted a preliminary, voluntary, and confidential notice to CFIUS asking for a review of Broadcom’s potential board coup. When Broadcom attempted to redomicile to the United States to avoid CFIUS purview (as it would no longer be a foreign company but a domestic one after it redomiciled), the government’s anger was palpable and sealed the company’s fate. The board’s original outreach to CFIUS precipitated the sequence of events that led to Trump’s block this past week.

Qualcomm’s board won the war, but it is still facing a rebellion from its own bosses. The board will be up for election unopposed this week at the company’s delayed shareholders meeting. Perhaps taking a page from tomorrow’s Russian presidential election, some shareholders are withholding their votes from the board slate to show their displeasure with the entire saga. From the Wall Street journal, “Institutional Shareholder Services Inc., an influential proxy-advisory firm, … in a note to investors late Wednesday, stood by its original recommendation that shareholders vote for four Broadcom nominees for Qualcomm’s 11-person board, even though the votes won’t count.”

That shareholder meeting will no doubt be eventful. While the board and the company’s execs will argue that they have a strategy moving forward, they confront two other ongoing firefighting challenges and one new one that could be another round of bruising internecine warfare.

Qualcomm is still in the midst of its $44 billion NXP acquisition, which continues to wait on Chinese regulatory approval. The timeline for that approval is still unclear, but even when Qualcomm does receive it, the company will still have to close the deal and actually implement the transaction. That will take significant time and energy.

Even more complicated is the continuing fight with Apple and Huawei over Qualcomm’s IP licensing revenue. Licensing revenue is crucial for Qualcomm, and the litigation around the fight will force the board to continue monitoring the day-to-day legal tactics of the company rather than focus on a longer-term vision of how to work with the largest smartphone producer in the world to generate profits.

On top of those two challenges, another takeover attempt could potentially exhaust the board further. Yesterday, Qualcomm’s board voted to remove board member Paul Jacobs, who is the son of Qualcomm’s founder and the company’s former chief executive from 2005 to 2014. He had been demoted from executive chairman to director just last week. As the New York Times noted, “The split, which means no member of the Jacobs family will be involved at the top echelons of Qualcomm for the first time in 33 years, was not friendly.”

According to reports, Jacobs is attempting to raise more than $100 billion to buy the company, potentially leveraging SoftBank’s Vision Fund in the process. SoftBank, of course, is a Japanese company, and the Vision Fund has significant capital from foreign countries including Saudi Arabia and the United Arab Emirates. Even more ironically, Qualcomm is an investor in the Vision Fund.

Jacobs is following in the footsteps of Michael Dell who bought the eponymous tech company back in 2013 in a take-private transaction worth $24 billion. Can Jacobs even raise the required amount of capital, four times more than Dell? Will Qualcomm be forced to run back to the Trump administration in order to avoid a “foreign” takeover of the firm yet again, this time by the son of the company’s founder?

My guess — fairly weakly held — is that the answers are yes and no. Jacobs will find the money, and the board won’t fight a distinguished former executive — even if Jacobs was running seriously behind in shareholder approval in the Broadcom fight. We will learn more in the coming weeks, but expect more strategic actions here (maybe from Intel) as well.

Broadcom regroups

Despite its very public failure, Broadcom is in a much stronger position coming out of this battle. It beat analyst estimates this week for its Q1 earnings, and has seen impressive growth in its wireless communications segment, which were up 88% year-over-year. It also managed to lower expenses, which helped drive an increase in gross margin to 64.8% (aren’t fabless and patents awesome?)

Broadcom continues to deliver strong results, but the big question post-Qualcomm is really what’s next? Qualcomm was the single most important chip company that might have been available for purchase (Intel is out of Broadcom’s league). While it plans to continue to redomicile to the U.S., which should allow it to get back into the acquisition game in America, Broadcom may struggle in the coming years to find the kinds of accretive acquisitions that can keep its growth on the trajectory it has been on over the past few years.

Shareholder power wanes?

The biggest questions coming out of the Qualcomm / Broadcom spat is not related to the companies themselves, but the entire intellectual edifice of shareholder rights and the framework used by American companies to conduct corporate governance.

Qualcomm’s board of directors took extraordinary steps to block the Broadcom acquisition. They unilaterally went to Washington to get an injunction not on a deal — which had never been consummated between the two companies — but to block Broadcom from replacing its board of directors in a standard shareholder vote. This is a very important distinction: Qualcomm’s board saw the direction shareholders wanted to go, and essentially decided to just ignore the election process entirely.

From Dealpolitik columnist Ronald Barusch:

This change threatens over three decades of a carefully balanced governance system. Since the Delaware Supreme Court approved the use of the poison-pill takeover defense in 1985, the courts have basically blessed the following tradeoff: On the one hand, corporate directors can fight tooth and nail to stop a deal and the courts will give only limited scrutiny to defensive tactics.

However, the board is strictly limited in any moves to interfere with shareholders’ ability to replace directors and force a company to change course that way. In the vernacular of a leading Delaware case, a “just say no” defense doesn’t mean “just say never.” A bidder with enough patience who can convince a target’s shareholders to change directors has a path at least toward cooperation on resolving regulatory impediments to a deal.

This is a unique case as Barusch notes, but at what point can boards use every method at their disposal to prevent their own shareholders — the people they have a fiduciary duty to represent — from taking charge of the company? This past week presents one of the most complex examples to date, and it wouldn’t surprise me if a shareholder decides to attempt a legal attack on Qualcomm.

The other side of the potential waning of power for shareholders is CFIUS itself. The Trump administration ended a potential deal for a company that shareholders were widely in favor of. Where do the rights of shareholders to realize a return on their equity end and the right of America as a nation to control national security technology start?

We are on new terrain, and there are no clear answers here. In many ways, it depends on what happens over the next few years of the Trump administration. If there are more blocks like what we saw this week, we could see a radical change in the corporate calculus that would have a long-term negative effect on the value of some American companies.

Hostile takeovers may be incredible drama for writers like yours truly, but they have enormous consequences for companies and the employees who work at them. Qualcomm is going to have to shore up its support with a whole host of stakeholders in the coming months (while dealing with a potential take-private fight), while Broadcom needs to find its next strategy for further growth. All of us are going to have to deal with new uncertainty around the power of shareholders to shape the destiny of their companies. The war is over, but the aftermath and its consequences have just begun.