Whenever you look for the best stocks to invest in, you come across the Facebook stock. But not everyone knows if Facebook is halal or haram.
To consider if Facebook is halal (Shariah-compliant), we will use the following three financial ratios.
- The business activity
- Interest-bearing debt to its market cap
- Interest-bearing securities to its market cap
Facebook Business Activities
Facebook was established in 2004, and it generates revenue from computer services. The company focuses on building products that help people connect and share through mobile devices, personal computers, virtual reality headsets, and in-home devices. Its mission is to give people the power to build community and bring the world closer together. The company owns not only Facebook but also Instagram, Messenger, WhatsApp, and Facebook Reality Labs. Indeed, all these platforms enable users to connect, share, and communicate on mobile devices and personal computers. For instance, Facebook Reality Labs, the latest innovation by Facebook Inc, offers augmented and virtual reality products, including Oculus virtual reality technology and content platform.
Is Facebook stock halal?
So, let’s begin to screen based on the above criteria and find out if Facebook stocks are halal.
Firstly, we check business activity to know if Facebook stock is halal or haram. The company’s impermissible business activities account for only 0.053% of overall revenue. However, 97.67% of total revenue comes from questionable activities. As a result, we cannot precisely say it is halal or haram as almost all revenue derives from questionable business activities. Facebook’s compliance status is questionable.
Secondly, we conduct financial screening analyses. We screen its interest-bearing debt ratio. The debt amount should not exceed 30% of its market cap. In the case of Facebook, the percentage of interest-bearing debt is 0.09% of its market cap. So, we can conclude that it passes this criterion.
| Total Debt | $579M |
| 36 Months Average Market Cap | $664.04B |
Finally, we need to screen interest-bearing securities. Facebook’s interest-bearing securities account for 8.75% of its market cap. Evidently, the number of securities that aim to receive interest should not exceed 30% of its market cap.
| Cash & Equivalents | $58.08B |
| 36 Months Average Market Cap | $664.04B |
Even though Facebook passes two financial screenings, most of its revenue comes from unknown business activities. Therefore, the Facebook stock is marked as questionable, and it may not be the best option for Muslim investors to invest.
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