Bye, $100 billion!
FACEBOOK LOST MORE IN A DAY THAN ENTIRE VALUE OF GOLDMAN SACHS, LOCKHEED MARTIN OR COSTCO
Facebook had to swallow the bitter pill as years of security lapses pulled the company’s market capital down
Bye, $100 billion (Dh367 million).
That’s the bitter pill Facebook swallowed Thursday as years of security lapses pulled the company’s market capital down by more than $100 billion.
The cliff dive was the largest single-day drop in value in Wall Street history. Founder Mark Zuckerberg lost more than $15 billion of wealth in a single day.
Company shares plunged more than 19 per cent, and executives from the social media giant said revenue growth would continue to decelerate for the rest of 2018.
Now, Facebook looks to reassure its own workforce, as well and users and investors, of its ability to right former wrongs and recover from its recordshattering loss.
That includes firm leadership to boost morale within Facebook’s internal ranks, experts say, all while the company tackles its ongoing challenge of restoring the trust of customers.
“Facebook, its reputation and the people who work in it have been pretty battered over the past year,” said Nell Minow, vice-chair of the corporate governance consulting firm ValueEdge Advisers. “And so this is just one more mud pie in the face.” If a day later you’re still puzzling over what exactly $100 billion looks like, we feel you. First, some context.
The money Facebook lost in one day amounts to more than the enter market capitalisations of some of America’s largest companies. Or another way to look at it, it’s more than the GDP of entire nations.
Experts said part of Facebook’s response requires triage within the company’s own ranks.
In the world of corporate governance, Minow said, companies are encouraged to align the interests of their employees, executives and shareholders, including by having employees own stock.
“So the downside of that, quite literally, is that when something like this happens, they start panicking about their net worth rather than paying attention to what’s going on at the office,” she said.
Any efforts to revamp corporate culture stem from the top, said Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management. Companies whose leaders grow increasingly isolated often fall into the trap that “on earth, one person is truly indispensable, and that’s themselves,” he said.
Young workforce
Plus, Sonnenfeld said, Facebook risks losing a young, talented and mobile workforce that may not be unflinchingly loyal to the company brand.
“You can’t pound your fist and command a culture — a lot of CEOs are naive about that,” he said. “It doesn’t matter what kind of shirts you wear, the architecture you use in the office. It’s what you actually do. A culture responds from what you do.” The added scrutiny put on Zuckerberg last week is reason for him to lean on Facebook’s board, Sonnenfeld added, not only for its expertise but to help loop in some of Facebook’s most prominent critics. Sonnenfeld said companies that learn to immerse themselves in tough criticism — such as privacy experts, for example — are often most equipped to turn the corner out of a crisis.
“When things like this happen, people will take a look at whether the leadership team of Facebook is the right team to have in place,” said Gabrielle Adams, assistant professor of public policy and psychology at the University of Virginia.
On top of Facebook’s internal insecurity, Adams noted that its stock market beating also shapes user perceptions of a company already shouldering a record of privacy and security breaches. Some users might take the stance that “you deserve this, and this is justice or punishment,” while others might view the $100 billion drop as “not what Facebook deserves.”
Facebook’s task is to reach both of those groups, Adams said, and show it is taking the blunders of the past few months and Thursday’s stumble seriously.
Minow noted that much of the consumer mistrust in Facebook stems not just from Thursday’s stock drop, but from a longer-term cynicism about the company’s trustworthiness “as a provider of information and as a seller of its own personal information.”
“They’ve begun to address it with some rebranding,” Minow said. “But that’s a big mountain to climb.”
Rising oil prices pushed second-quarter profit at ExxonMobil Corp up 18 per cent to $3.95 billion (Dh14.5 billion), but the results on Friday fell short of Wall Street expectations, and the shares fell nearly 3 per cent.
The price of benchmark international crude is up more than 50 per cent from a year ago. But Exxon’s production of oil and natural gas slid 7 per cent, so it didn’t fully take advantage of the higher prices.
Rival Chevron Corp, by contrast, boosted production by 2 per cent and more than doubled its second-quarter profit from a year ago.
“The second quarter results were well below market expectations,” Neil Hansen, Exxon’s vice-president of investor relations, acknowledged at the start of a call with analysts. He said the company was making progress with key investments that will pay off in the long term.
Exxon boosted its capital spending sharply — a reversal from the cutting that Exxon and other major oil companies did after the price collapse that started in 2014. It has major projects under way off the coast of South America, in Africa and Papua New Guinea.
Exxon predicted on Friday that it will produce the equivalent of 3.8 million barrels a day including natural gas, down from 4 million barrels a day in 2017.
Jordan’s largest lender, Arab Bank Group, reported a 5 per cent rise in first-half net profit to $436 million (Dh1.6 billion) from $415 million a year earlier driven by steady growth in core banking services.
A statement released yesterday by the bank, one of the Middle East’s major financial institutions, said net operating income rose 13 per cent to $668.5 million during the same period.
Total loans rose 3 per cent to $25.5 billion while deposits fell to $33 billion compared with $33.8 billion at the end of last year.
Chairman Sabih Al Masri said the bank’s diversified operations and geographic spread allowed the bank to be able to “adjust to a challenging operating environment”. Arab Bank operates in 30 countries on five continents, and owns 40 per cent of Saudi Arabia’s Arab National Bank ANB.
CEO Nemeh Sabbagh said liquidity continued to be robust with a loan-to-deposit ratio of 71.6 per cent. The bank’s provisions coverage ratio for non-performing loans stood in excess of 100 per cent.