$120 billion wipeout!
Facebook suffers biggest value share plunge in corporate history
MORE than $120bn was wiped off Facebook’s value after months of scandals and fresh fears about its future profits. The company founded by Mark Zuckerberg admitted growth in user numbers had faltered and issued a bombshell warning that profits were set to be squeezed for years.
As brokers rushed to slash their price targets, Facebook’s shares fell 19pc, or $41.24, to $176.26. It wiped about $122bn off its value – the biggest one-day drop to ever hit a company. The fall was equivalent to the entire value of nike and McDonald’s.
The biggest previous drop came in 2000, when Intel saw $91bn knocked off its market cap. Zuckerberg’s personal fortune, closely tied to Facebook’s success, was dealt a $16bn blow. The turmoil came in the wake of the Cambridge Analytica scandal, criticism about fake news, and damaging revelations that Russians used the social network to meddle in US elections, forcing it to review its approach to privacy, data and advertising.
Zuckerberg predicted profit would be squeezed for years but said investing in security and privacy changes was the right thing to do.
The admission fuelled fears on Wall Street that its business model was under threat, with regulators and lawmakers in the US and europe turning the screw.
Alongside tough grillings from US lawmakers, Facebook has had to comply with new EU privacy rules. Zuckerberg said: ‘We will continue to invest heavily in security and privacy because we have a responsibility to keep people safe. But as I’ve said, we’re investing so much in security that it will significantly impact our profitability.’
The chief executive admitted the number of users in europe had fallen from 282m to 279m in the second quarter. In the US and Canada, the user base stayed flat. Overall, it said it had 2.2bn monthly users.
Facebook has been left reeling by the Cambridge Analytica scandal, which saw it criticised after it emerged the social network failed to stop millions of people’s data from being used improperly.
And it has also been hammered by critics for the spread of fake news and interference in US elections by Russian users.
The share plunge caused Zuckerberg’s fortune to fall by $16bn to about $67bn, says Forbes.
US analyst, Baird, described the results as ‘bombshells’ and JP Morgan said: ‘Facebook’s results and outlook are disappointing, but “startling” is probably a better word. We think few, if any, anticipated this kind of reset.’
Richard holway, chairman at UK tech analyst house Tech-Market-View said: ‘Teens have been moving to Instagram, WhatsApp and Messenger. But now it looks as if overall usage is stalling.’