Facebook investors are starting to wonder if COO Sheryl Sandberg will leave the company (FB)

sheryl sandberg facebook coo

Facebook chief operating officer Sheryl Sandberg is facing unprecedented criticism following the company's most recent scandals.
Investors are now asking whether they should be worried if Sandberg, who is CEO Mark Zuckerberg's top lieutenant, will be leaving the company, according to a note from clients from Evercore.
Regardless of whether she ultimately goes, Facebook's crises will make it more difficult for the company to hire and retain talent — though Wall Street doesn't necessarily believe that it'll cut into the company's core advertising business.

Sheryl Sandberg is finally in the firing line.

During Facebook's years of scandals, the longtime chief operating officer has managed to evade significant criticism, even as CEO Mark Zuckerberg was repeatedly assailed for the social network's role in spreading misinformation.

But a bombshell report into senior leadership's response to Facebook's mounting crises has now exposed Sandberg to unprecedented scrutiny — and now investors are asking whether they should be worried about her leaving.

Evercore analyst Anthony DiClemente, in a research note for clients published Tuesday, said investors are getting spooked by the constant drumbeat of negative press surrounding Facebook and are questioning whether the 49-year-old billionaire exec might ultimately leave the Silicon Valley tech giant.

"We continue to receive inbound questions from investors expressing concerns around the potential impact of a persistently negative news cycle on core business fundamentals," he wrote.

"These concerns surround whether or not we are likely to expect similar reports regarding strife inside of [Facebook], the possibility of high-profile executive departures (namely, Sheryl Sandberg), and the potential negative impact of negative headlines to ad demand."

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Sheryl Sandberg made Facebook what it is today — for better and worse

Sandberg, a former Google executive, joined Facebook in 2008, and is widely credited with building Facebook into the wildly profitable advertising juggernaut that it is today. Her remit as COO includes overseeing communications and policy — two areas that have placed her at the center of the most recent scandal.

Last week, The New York Times published an investigation into how Facebook has handled its successive crises, from the spread of Russian misinformation to Cambridge Analytica. It found executives attempted to deflect criticism, downplay some public disclosures, and smear critics with links to liberal billionaire George Soros — a line of attack some have said plays into anti-Semitic tropes.

The report described Sandberg as integral to many of the decisions made, and while she has publicly denied knowledge that Facebook hired Definers, the opposition research firm behind the George Soros attacks, she has accepted responsibility for it. And according to a recent report from The Wall Street Journal, Zuckerberg blamed her for the fallout from the Cambridge Analytica scandal, making her wonder whether she should fear for her job.

Publicly, Zuckerberg has defended her role, telling reporters: "Sheryl is doing great work for the company. She’s been a very important partner to me and continues to be, and will continue to be." Another executive has said Sandberg has seen a groundswell of support from Facebook employees amid the turmoil.

But this clearly isn't enough to completely assuage Wall Street investors' concerns she might be on her way out.

Even if Sandberg doesn't leave, other employees might

Evercore is lowering its price target for Facebook's stock in response to investor fears, from $180 to $175. But it's still a significant premium on where it's currently trading, which is $131.18, as of writing.

"More than a week of bad press has led investors to question the possibility that headlines result in a pullback in ad demand," DiClemente wrote. "While our own conversations with ad buyers and industry contacts provide no direct evidence of a slowdown in demand for Facebook’s ad products in the immediate future, we believe it prudent to assess potential downside and incorporate incremental conservatism into our own forecasts."

Pivotal analyst Brian Wieser, who has a rare negative outlook on Facebook, agrees that the latest news is unlikely to cause major changes for advertisers, even as he pushes a much more pessimistic view of Facebook's prospects.

"We recognize that marketers are generally amoral in how they allocate money to media owners, such as Facebook," he wrote, adding that the news will create other risks for the company, like unprecedented difficulty hiring and retaining talent — something echoed by current and former employees who spoke to Business Insider.

"Marketers might not cut spending directly, but scrutiny of budgets on Facebook will increase, as will the time Facebook executives will spend explaining themselves the next time something goes wrong," he wrote. "Attracting and retaining talent to work at Facebook, who will decide for themselves whether or not morality matters and whether it matters enough at Facebook will be yet another intangible factor for investors to consider."

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