Elizabeth Warren's proposal to break up big tech shouldn't shake Amazon shareholders — yet

  • Sen. Elizabeth Warren, the Massachusetts Democrat and presidential candidate, proposed on Friday a plan to break up big tech companies like Amazon,Facebook, and Alphabet‘s Google.
  • The plan doesn’t appear to immediately threaten Amazon, said Eric Sheridan, an analyst at UBS, who spoke with Markets Insider on Friday.
  • Still, regulation is the top concern he discusses with investors, as far as challenges facing large-cap tech names.
  • Watch Amazon trade in real-time.

Sen. Elizabeth Warren, the Massachusetts Democrat and 2020 presidential contender, announced on Friday a plan to break up big tech companies she argues have grown too big.

“Today’s big tech companies have too much power  –  too much power over our economy, our society, and our democracy,” Warren wrote before the stock market opened. “They have bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

Warren’s plan named Amazon,Facebook, and Alphabet‘s Google, and would force the rollback of some of their acquisitions, like Facebook’s WhatsApp and Instagram, Amazon’s Whole Foods, and Google’s Waze.

Amazon shares – which in recent weeks have been engulfed in a flurry of announcements and political controversy – opened lower Friday morning, but finished little changed as the broader stock market recouped the majority of its early losses.

At the moment, Warren’s plan still has a lot of unknowns – like which federal agency would see to the proposal, said Eric Sheridan, an analyst at UBS who has a “buy” investment rating on the stock.

And while regulation is the “number one topic” Sheridan discusses with investors as far as mega-cap tech headwinds go, he thinks Amazon is not under threat, at least in the near-term.


Read more:
Elizabeth Warren says she wants to break up big tech companies, including Amazon, Google, and Facebook

“I would expect – and I’ll try to make this as least a political statement as possible – I would expect, given the stance the Democratic party might try to take into the election of being more progressive and left-leaning, that I’m sure there will be plenty of press releases and shots taken at big tech in the next year, year and a half,” Sheridan told Markets Insider on Friday. “It’s a fairly easy mechanism to score political points. Whether it ever turns into something that’s reality, we’ll continue to factor.”

He added: “I think we’re a long way from that going from noise, and a political issue, to reality.”

In a report Sheridan wrote in November 2017, he and his colleagues came to the conclusion around the state of large-cap Internet regulation that investors were heading into a “multi-year wave that would act as a headwind for the group.”

The proposal may be subject to legal obstacles, Sheridan said, as the deals that Warren is taking aim at have already been approved by US regulators. There’s not a lot of precedent for going back and revisiting prior approved mergers, and then breaking them apart, “but we’ll have to monitor it,” he said.

“If you look at why I think some of the companies have underperformed for certain periods of time in the last year and a half – we have a neutral rating on Facebook – we think some of these issues do factor into stock prices, and multiple compression, and things like that,” Sheridan said, referring to data and privacy issues.

“There’s no doubt that when GDPR was implemented, or the Cambridge Analytica scandal, that those had a headwind impact on the stocks.”


Read more related coverage from Markets Insider and Business Insider:


Amazon took over the $US176 billion market for cloud computing. Now it’s using the same playbook in logistics.


Elizabeth Warren’s plan to break up tech giants would force Amazon to roll back its acquisition of Whole Foods


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