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Facebook Stock Disaster: How it Went so Wrong for Zuckerberg so Quickly

Facebook’s $100 billion plus rout is the largest market value loss by a company in US stock market history.

Vishal Mathur |

Updated:July 27, 2018, 2:48 PM IST
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Facebook Stock Disaster: How it Went so Wrong for Zuckerberg so Quickly
Facebook’s $100 billion plus rout is the largest market value loss by a company in US stock market history.
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It has not been a good last few hours for Facebook. The social media network reported in the Q2 2018 earnings call that the revenue increased 42 percent to $13.2 billion, but that was still lesser than the Wall Street estimates of $13.3 billion. What has ensued is nothing short of a panic induced bloodbath. The company’s shares slid by more than 20 percent, which meant CEO Mark Zuckerberg lost as much as $16.8 billion immediately after the earnings call. Now, Facebook’s market value has slid by $119 billion to $510 billion, as the stock price fell by 19 percent. According to financial research firm FactSet, Facebook’s market cap was nearly $630 billion, before the plummet.

This is perhaps a slightly delayed reaction to the controversies surrounding Facebook in recent months. The scandals are hurting the business. There is the combined impact of the Cambridge Analytica user privacy scandal, the political complication Facebook found itself in after details of Russian involvement in the elections came to light, and the visits which the company CEO Mark Zuckerberg made to the Congressional hearings this year. At the same time, the social network is unable to rein in the spread of fake news and misinformation on its platform—but to be honest, WhatsApp and Twitter are also struggling with the fake news debate. This also means Facebook is spending a lot more on resources, to clean up the content being shared on the platform.

While there has been a user backlash after Facebook’s controversies, the Facebook owned photo sharing network Instagram crossed the 1 billion user mark just last month. The other side of the coin sits WhatsApp, which has also been facing a lot of criticism for having been unable to rein in the spread of fake and violence inciting messages. In fact, WhatsApp right now is at loggerheads with the Indian Government, with the latter demanding stronger measures to control the spread of misinformation via the instant messaging app ahead of the general elections next year.

As things stand, Facebook has become the first company in the US stock market history to have lost $100 billion in market value, in a single day. The largest single day loss before this was Intel’s, when the tech company lost $90.74 billion in market value in September 2000, coinciding with the ‘dotcom bubble burst”.

Also read: Facebook Reports Slower Growth in Q2; Mark Zuckerberg Loses $16.8 Billion as Shares Slide

However, the controversies aren’t the only problem. Over the next few quarters, Facebook will certainly feel the impact of slowdown in growth—after all, the social network doesn’t have much more space to grow. There are currently 2.23 billion people using Facebook right now, and there really aren’t many new signups on the horizon.

Facebook has always used the news feed to earn money, with targeted advertising. The more adverts on the timeline, you knew the more money Facebook was earning—but too many adverts, and people will turn away. Now, the company has to look at other businesses including Messenger and virtual reality, the numbers and the future of both being less than certain at this point.

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