Markets unfriend Facebook

A plunge in Facebook shares erased almost $120 billion of the social media giant’s market value Thursday, snapping a three-day winning streak for the S&P 500 index.

Facebook’s tumble was the worst-ever single-day drop in value for a U.S. company, and led a sell-off in technology companies that offset solid gains in other areas of the market, including industrial and energy stocks and consumer goods companies.

Facebook, which closed at an all-time high of $217.50 on Wednesday to $176.26, after warning investors that it sees slower revenue growth ahead, and that its user base and revenue grew more slowly than expected in the second quarter. The 19 per cent drop was the biggest decline for the company since it went public in 2012.

The slower growth came about as the company grappled with privacy scandals. All told, $119 billion of its value was wiped out, eclipsing a $91 billion loss for Intel in September 2000, according to Birinyi Associates.

“For such a big company to suffer such a significant decrease in price is really amazing to watch,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank.

The company also warned that it expects revenue growth to decelerate in the next couple of quarters as it promotes new, and for now less profitable, products – such as its Stories disappearing message feature. It is also allowing users to make “more choices” around data privacy amid public outcry and regulatory pressures.

The earnings covered the company’s first full quarter since the Cambridge Analytica privacy scandal erupted.

But analysts attributed the user growth shortfall largely to European privacy rules that went into effect in May, not to the furor over the political consulting firm with ties to U.S. President Donald Trump, which improperly accessed the data of tens millions of Facebook users.

Still, the results suggest that Facebook may have weathered the scandal without major harm to its business, even if its public image has taken a hit. While revenue fell short of Wall Street estimates, it did so by only about one per cent; profits, meanwhile exceeded forecasts.

But Facebook continues to grapple with big existential questions, ranging from its users’ privacy to tech addiction to how it deals with fake news and misinformation, hate speech and extremism on its service.

At times, it has seemed as though Facebook can’t quite decide where its values really lie. For instance, it continues to straddle the line between policing what users say and remaining a neutral platform in an increasingly divided world, and between protecting privacy while collecting as much information on its users as possible.

Facebook had 2.23 billion monthly users as of June 30, up 11 per cent from a year earlier. Analysts were expecting 2.25 billion, according to FactSet.

User growth – both on a monthly and daily basis – was flat in the U.S. and the rest of North America, while it declined slightly in Europe.