Facebook stock dives to May levels

Thurs day’s

massacre of Facebook shares, which plunged 19% in the biggest one-day drop in history, answered one big question. The stock, it turns out, can fall every bit as fast as it rises.

The Thursday stock collapse vaporised $119 billion of the company’s market value. Chief executive Mark Zuckerberg saw his net worth fall by roughly $16 billion as a result.

Yet the decline merely returned Facebook shares to a level last seen in early May. At that point, the stock was still recovering from an earlier battering over a major privacy scandal. Investors had been piling into the stock ever since. On Wednesday the shares hit a new record high before retreating.

Late Wednesday, Facebook warned that its revenue growth will slow down significantly for at least the remainder of the year and that expenses will continue to skyrocket.

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 furore over the political consulting firm with ties to US President Donald Trump, which improperly accessed the data of tens millions of Facebook users.

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.

Both the slower growth forecast and heavier spending reflect problems largely of Facebook’s own making.

New European privacy rules, inspired in part by Facebook’s relentless mining of its own users’ data, are starting to hamper the company’s advertising business. And the increased spending aims, among other things, to prevent a replay of the fake news and propaganda that Russian agents unleashed on an unguarded Facebook in an attempt to sway the 2016 presidential election.

Mr Zuckerberg even noted during a call with analysts that, “we’re investing so much in security that it will significantly impact our profitability.”

Some see the Facebook sell-off as clear evidence that nothing can grow forever. Facebook revenue is still growing at a rate double that of Twitter.

“Mark Zuckerberg isn’t panicking,” he said. “The Facebook board isn’t panicking. Most of its large institutional investors aren’t panicking. They know they’re in it for the long game.’’