By Jen Saarbach & Kristen Kelly, Co-Founders of The Wall Street Skinny
There’s been renewed buzz about Big Tech breakups after a courtroom reveal: Mark Zuckerberg considered spinning off Instagram in 2018 over fears of antitrust scrutiny. The news surfaced during a high-profile trial in Washington that’s widely seen as the first real test of the Trump administration’s new posture toward regulating tech giants.
Facebook bought Instagram in 2012 for what seemed a huge price at the time: $1bn.
In hindsight it’s gone down as probably one of the “best” acquisitions of all time, given Instagram is likely currently worth somewhere between $100- 250bn (using what we can glean about their revenues since Meta doesn’t make that info public, and applying a similar multiple to where comps like Snapchat and Meta trade).
Documents also emerged that showed a Facebook email where Zuckerburg said “It’s better to buy than compete” supporting the FTC’s “buy or bury” allegation: that Meta intentionally snapped up emerging competitors to preserve its monopoly.
While the trial has focused on Meta, the implications extend well beyond. If the government decides to act, what happens to Google (Alphabet) and its ownership of crown jewel assets like search, YouTube etc.?
So this felt like an awesome opportunity for us to discuss the range of options available to these big tech giants as the government comes after them about breaking up their business…and what it would mean for anyone who owns Meta stock (probably most of us, or at least anyone invested in the Nasdaq or S&P.)
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The Two Buckets: Sell It or Separate It
When companies “break up”, there are generally two ways it can go:
- Sale – Sell the asset outright in what’s called a “divestiture”
- Public Market Separation – Use structures like spinoffs, split-offs, or carve-outs
Let’s walk through each using Meta and Instagram as a case study.
- A Sale (Divestiture)
Meta could sell Instagram. Theoretically. But who could buy it?
Instagram generates billions in revenue (estimates from 2023 are between $39 – 60bn) and is arguably more valuable than most other public companies.
Selling it to another tech titan like Apple or Google would just create new monopoly concerns. And there are few players — strategic or financial — who could credibly afford it. So while clean in concept, a sale would likely have never been on the table. Not to mention it would mean a Meta competitor would be the buyer, likely a nonstarter for Zuckerberg.
- Equity Carve-Out
This brings us to the set of tools called “public market separation techniques” which are basically what they sound like…ways to separate companies using the PUBLIC markets.
The first tool, and a common one companies use is an equity carve-out, sometimes called a “subsidiary IPO“.
Meta could IPO a minority stake in Instagram (say 10–20%), while keeping majority control. It would raise cash, offer transparency into Instagram as a standalone business, and give Instagram its own stock which not only could help incentivize its own leadership, but also become its own form of acquisition currency to pursue acquisitions.
But here’s the rub: Meta would still be in control. Since Meta knew the government was going to come after it for monopoly concerns, this wouldn’t cut it.
- Spinoff: The Clean Break (and the one in question)
The option Meta specifically mentioned entertaining is a spinoff.
Meta would distribute Instagram shares to existing shareholders. Own Meta now? You’d wake up with shares in both Meta and Instagram. The value of Meta would obviously be lower because it no longer owns Instagram, but YOU own Instagram now as a separate company! It’s a clean break, and — if structured properly — it can be tax-free to investors.
- Split-Off: Choose Your Adventure
A split-off is like a spinoff — with a twist. Shareholders choose:
a.) Stay with Meta OR
b.) Exchange shares for stock in the newly separated Instagram.
This results in two cleanly separated investor bases and offers a clear path to disentangle business lines. It also functions like a share buyback in a way because investors that choose Instagram must surrender Meta shares in exchange for Instagram shares.
This is less common, and Zuckerberg did not mention this, but if we see other tech giants go the breakup route, it’s an option.
The Bigger Picture
While most companies resist breakups, history shows that spinoffs often outperform their parent companies. Why?
Because the “synergies” companies cite to justify staying together are often overstated— while the strategy tax (aka conglomerate discount) of running two very different businesses under one roof is real.
Unleashing Instagram to operate independently might have unlocked value for both sides…maybe. Instead Meta chose to further integrate the two further.
Whether Meta, Alphabet, or Amazon — if the new administration is serious about taking on Big Tech, these are the playbooks in motion. And while boardrooms may dread the word “breakup,” the markets often don’t. More transparency, better alignment, and freedom to focus can lead to stronger execution and higher valuations.