Facebook braces for biggest one-day wipeout in US stock market history

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Facebook has had the worst day in stock market history as shares plunged 19 percent, wiping $119 billion off the company’s value.  

Thursday was the social media giant’s worst day in six years as a public company, as well as the biggest one-day wipeout in US stock market history. 


CEO Mark Zuckerberg saw $12 billion wiped off his fortune in less than 24 hours. 

The Facebook founder’s net worth is now valued at $74 billion, dropping him to the fifth richest person in the world.

Facebook’s shares plunged $41.24 to $176.26 after it failed to meet Wall Street’s estimates for user growth and quarterly revenue.  

Facebook has had the worst day in stock market history as shares plunged 19 percent, wiping $119 billion off the company’s value

Eight Facebook insiders have sold a combined total of $3.9 billion worth of stock since the social media site was plagued by the Cambridge Analytica scandal. 

The sales were part of pre-determined trading plans, according to Bloomberg.

Zuckerberg accounted for about 90 percent of total sales, which were part of a pre-determined plan he announced last September

The Facebook CEO and his wife Priscilla Chan pledged they would sell most of their shares over time so that they could invest in charities.   

Brian Wieser, an analyst at Pivotal Research, has been recommending to sell Facebook stocks since last year. He predicts the social media giant’s shares still have another 20 percent to fall.

Wieser’s street-low price target – his prediction of where stocks will move within the next year – is at $140, compared to the $174.78 low Facebook hit during early Thursday trading. 

The share price eventually closed in $176.26, but Wieser believes Facebook’s days of 30 percent growth are now outnumbered.

‘What a lot of the investment community has missed, is that they looked at growth as rather infinite,’ Wieser told Bloomberg TV. ‘This is only part of a bigger story that hasn’t fully played out yet.’

Investors hammered shares in the social media giant after it reported slower revenue growth in the second quarter after markets closed on Wednesday. The results fell short of Wall Street expectations as the company continues to grapple with privacy issues.

Subsequently, in overnight trading, the company’s shares plunged 20 per cent, a figure that was then reflected when markets opened Thursday morning.

Facebook’s second-quarter results were the first sign that new European privacy laws and a string of privacy scandals involving Cambridge Analytica and other app developers are hitting the company’s business.

In midday trading Thursday, the company’s market value (the number of outstanding shares multiplied by the value of a single stock), fell by more than $122 billion.

That means that in one day, just the decline in Facebook’s market value is roughly the entire market value of McDonald’s or Nike, give or take a few billion. And it far exceeds to total market value of major U.S. multinational corporations such as General Electric, Eli Lilly or Caterpillar.

But the company still has a total market value close to $511 billion, which exceeds the annual gross domestic product of countries like Poland, Belgium and Iran.

The $15.8 billion in net worth that Zuckerberg stands to lose in the move is equal to the wealth of the world’s 81st-richest person, currently Japanese businessman Takemitsu Takizaki, according to Forbes real time data. 

The tumbling stock prices comes as:

  • The social media giant released its financial results on Wednesday reporting slower revenue growth in the second quarter
  • Shareholders filed a proposal to fire Zuckerberg as chairman of Facebook, citing ‘mishandling’ of scandals including user privacy and election meddling
  • Facebook executives defended hosting Fox News and ‘atrocious’ Infowars on its platform in a heated exchange with reporters
  • The parents of a Sandy Hook massacre victim begged Zuckerberg to remove hateful and harassing comments posted by conspiracy theorists

Describing the announcements as ‘bombshells’, Baird analysts said the issues were to a large degree ‘self-inflicted’.

Facebook executives made investors nervous on Wednesday in a call with analysts when they said profit margins would plummet for several years due to the costs of improving privacy safeguards and slowing usage in its biggest advertising markets.

Chief financial officer David Wehner warned in the earnings call that revenue growth had already ‘decelerated’ in the second quarter and would drop ‘by high single digit percentages’ in coming quarters.

The sharp decline eradicated about $128 billion off the company's value - or nearly four times the entire market capitalization of Twitter Inc

The sharp decline eradicated about $128 billion off the company's value - or nearly four times the entire market capitalization of Twitter Inc

The sharp decline eradicated about $128 billion off the company’s value – or nearly four times the entire market capitalization of Twitter Inc

At one point during the call, Facebook shares were trading down as much as 24 percent, an unprecedented drop for a large firm. 

Until Wednesday, Facebook shares had been at record highs as investors seemed to shrug off fears about data protection and probes into the hijacking of private information by the political consultancy Cambridge Analytica. 

For the second quarter, profit was up 31 percent at $5.1 billion; revenues rose 42 percent to $13.2 billion, only slightly below most forecasts. 

Ad sales in Facebook’s second quarter rose 42 percent to $13.04 billion but the costs, bolstered by moves to improve content and security after the data scandal, rose 50 percent from a year earlier to $7.37 billion. 

Mark Zuckerberg's fortune also took a $16 billion hit in the first five minutes of trading on Thursday as shares in his social media company plunged 19 percent to $175.30

Mark Zuckerberg's fortune also took a $16 billion hit in the first five minutes of trading on Thursday as shares in his social media company plunged 19 percent to $175.30

Mark Zuckerberg’s fortune also took a $16 billion hit in the first five minutes of trading on Thursday as shares in his social media company plunged 19 percent to $175.30

The Facebook CEO saw his net worth tumble by $18.8billion in after-hours trading on Wednesday, a record-drop that took him down four spots in Forbes' World Billionaires List

The Facebook CEO saw his net worth tumble by $18.8billion in after-hours trading on Wednesday, a record-drop that took him down four spots in Forbes' World Billionaires List

The Facebook CEO saw his net worth tumble by $18.8billion in after-hours trading on Wednesday, a record-drop that took him down four spots in Forbes’ World Billionaires List

Facebook’s monthly active user count was 2.23 billion, slightly behind the 2.25 billion forecast by analysts. Users in Europe dropped from 377 million to 376 million, partly as a result of the new General Data Protection Regulation (GDPR) rules. 

World stock markets fail to hold onto four-month highs after record sell-off in Facebook shares

World stock markets failed to hold onto four-month highs on Thursday as a record sell-off in Facebook shares offset optimism that the European Union and the United States would settle their differences on trade.

Executives warned that profits would continue to plummet as the company improves privacy safeguards.

That countered optimism over news that President Donald Trump agreed to refrain from imposing car tariffs while Europe and the US negotiated to cut other trade barriers.

MSCI’s gauge of stocks across the globe shed 0.04 percent after earlier in the day rising to the highest level since March 16.

The Dow Jones Industrial Average rose 112.97 points, or 0.44 percent, to 25,527.07, the S&P 500 Index lost 8.63 points, or 0.30 percent, to 2,837.44 and the Nasdaq Composite dropped 80.05 points, or 1.01 percent, to 7,852.19.

The dollar index rose 0.4 percent.

Liz Young, senior investment strategist at BNY Mellon Investment Management, said investors’ skepticism of the market is leading them to take a closer look at corporate earnings and other fundamental factors ‘rather than jumping on the bandwagon and investing in tech stocks’.

‘People need to be careful right now to be in those trendy trades,’ she said.

Yet the heat has eased somewhat over US and European trade issues, allowing markets to return their attention to central banks and their plans to withdraw stimulus.

‘Game theory tells us that, in a global trade war, nobody likes to be left out from a deal,’ Bank of America Corp analysts wrote in a note. ‘The US-EU deal…has reduced the risk of an escalating global trade war.’

The euro, which initially received the US-EU trade news warmly, fell sharply after European Central Bank boss Mario Draghi reaffirmed a commitment to keep interest rates on hold ‘through’ next summer, even though he saw inflation picking up by the end of the year.

The euro was down 0.69 percent to $1.1647.

Concerns about Facebook’s major earnings miss in an otherwise largely positive US corporate results season did little to support bonds, which lost value as yields resumed their climb higher ahead of an expected strong reading on US gross domestic product data on Friday.

Benchmark 10-year notes hit a six-week high and last yielded 2.982 percent, up from 2.936 percent late on Wednesday.

Progress on trade also helped demand for oil, which is sensitive to economic growth prospects. 

Crude prices also rose as Saudi Arabia suspended oil shipments through a strait in the Red Sea after an attack by Yemen’s Iran-aligned Houthi movement.

US crude settled 0.45 percent higher at $69.61 per barrel and Brent rose 0.83 percent to $74.54.

Trade is by no means removed from a slate of issues facing investors, with Washington still to finalize an agreement with Europe, while it remains in negotiations with China as well as with Canada and Mexico.

China’s blue-chip shares lost 1.1 percent. Qualcomm Inc dropped its $44 billion bid for NXP Semiconductors after a deadline for securing Chinese regulatory approval passed.

 

The plunging share prices follows months of criticism leveled against the social media giant over its handling of several recent scandals, including the Cambridge Analytica data saga and Russian meddling in the US election. 

The Cambridge Analytica scandal prompted several apologies from Zuckerberg and generated calls for users to desert Facebook, which has grown strongly since launching as a public company in 2012.

Industry experts had predicted, ahead of the announcement, that the number of active users visiting the social network would either drop or flat line.

According to analysts, stalling numbers are likely the result of forcing Facebook users to consciously opt-in to having their information used for personal advertising – one of the key stipulations of the stringent GDPR rules.    

GDPR, which came into affect May 25, stipulates that companies must explicitly request consent from their users in order to personal data for advertising purposes. Companies that do not comply with GDPR can be fined up to four per cent of their global revenue. 

To comply with the new regulations, Facebook rolled-out a security check-up to users worldwide which asked them to review what kind of personal information they consent to sharing for advertising targeting. Users were also asked to consent to facial recognition technology on the site. 

Analysts believe users may have been scared off by the explicit details about how their data is being used by the social network. 

It comes after shareholders tried to fire Zuckerberg as chairman of Facebook in a proposal filed on Wednesday by Investment company Trillium Asset Management.

The company, who has about $11 million in Facebook stock, wants to break up Zuckerberg’s role as both chairman and CEO, Business Insider reports.

The proposal argues that shareholders are unable to check Zuckerberg’s power given he holds roughly 60 percent of Facebook’s voting shares as both chair and CEO.

‘A CEO who also serves as chair can exert excessive influence on the board and its agenda, weakening the board’s oversight of management,’ the proposal states.

‘Separating the chair and CEO positions reduces this conflict, and an independent chair provides the clearest separation of power between the CEO and the rest of the board.’ 

The investment company says this oversight has contributed to Facebook ‘missing or mishandling’ several ‘severe controversies’ in past years, which they say increases risk exposure and costs to shareholders. 

The specific examples the shareholders used include: Russian meddling in US election, the sharing of 87 million users’ personal data with Cambridge Analytica, proliferating fake news and social unrest in Myanmar and Sri Lanka.

Chances of Zuckerberg’s roles being split remain slim given Facebook has rejected similar shareholder requests in the past. A proposal last year to oust Zuckerberg as chairman received 51 percent of the votes.

Meanwhile, in addition to the financial woes, a promotional event for Facebook’s new video feature descended into a shouting match on Wednesday, as reporters quizzed the social media giant’s executives about its decision to allow Fox News and Infowars on the platform. 

Facebook will be featuring Fox News alongside other news organizations on Watch, while right-wing conspiracy theory site Infowars has a Facebook page that is followed by nearly a million people. 

The debate at the Television Critics Association’s press tour in Beverly Hills began when Facebook’s head of video was asked why Facebook still hosted Infowars when it peddled conspiracy theories including calling the Sandy Hook massacre a hoax.

DAUs were 1.47 billion on average for June 2018, an increase of 11% year-over-year. Meanwhile, users in Europe dropped from 377 million to 376 million, partly as a result of the new General Data Protection Regulation rules

DAUs were 1.47 billion on average for June 2018, an increase of 11% year-over-year. Meanwhile, users in Europe dropped from 377 million to 376 million, partly as a result of the new General Data Protection Regulation rules

DAUs were 1.47 billion on average for June 2018, an increase of 11% year-over-year. Meanwhile, users in Europe dropped from 377 million to 376 million, partly as a result of the new General Data Protection Regulation rules

Monthly active users came in at 2.23 billion, which fell short of analysts' estimated 2.25 billion

Monthly active users came in at 2.23 billion, which fell short of analysts' estimated 2.25 billion

Monthly active users came in at 2.23 billion, which fell short of analysts’ estimated 2.25 billion

The reporter noted that Infowars host Alex Jones recently spread a fake story about special counsel Robert Mueller being a pedophile, telling his audience: ‘They’d let Mueller rape kids in front of people, which he did.’

FACEBOOK EARNINGS IN FIGURES 

Daily active users (DAUs) – DAUs were 1.47 billion on average for June 2018, an increase of 11% year-over-year.

Monthly active users (MAUs) – MAUs were 2.23 billion as of June 30, 2018, an increase of 11% year-over-year.

Mobile advertising revenue – Mobile advertising revenue represented approximately 91% of advertising revenue for the second quarter of 2018, up from approximately 87% of advertising revenue in the second quarter of 2017.

Capital expenditures – Capital expenditures for the second quarter of 2018 were $3.46 billion.

Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $42.31 billion at the end of the second quarter of 2018.   

Headcount – Headcount was 30,275 as of June 30, 2018, an increase of 47% year-over-year.  

Fidji Simo replied that although he found Infowars ‘absolutely atrocious’, Facebook’s approach to freedom of expression meant the company would only reduce the distribution of Infowars posts, rather than ban it completely.  

Zuckerberg was also being called on to remove hateful and harassing comments from the social media platform that have been posted by conspiracy theorists who don’t believe the Sandy Hook Elementary School shooting happened. 

Leonard Pozner and Veronique De La Rosa, the grieving parents of one of the 20 children killed in the 2012 Newtown shooting massacre, wrote Zuckerberg a letter published on Wednesday in The Guardian. 

Pozner and De La Rosa say they and other relatives of mass shooting victims have been harassed and threatened on social media and in person by people who claim the shootings were government hoaxes and the victims – including their son Noah – were actors. 

‘Our families are in danger as a direct result of the hundreds of thousands of people who see and believe the lies and hate speech, which you have decided should be protected,’ they wrote. 

‘We are unable to properly grieve for our baby or move on with our lives because you, arguably the most powerful man on the planet, have deemed that the attacks on us are immaterial, that providing assistance in removing threats is too cumbersome, and that our lives are less important than providing a safe haven for hate.’  

Ricky Van Veen, Head of Global Creative Strategy and Fidji Simo, Director of Product at Facebook, had combative exchanges with reporters at an event to promote Facebook Watch in Beverly Hills on Wednesday

Ricky Van Veen, Head of Global Creative Strategy and Fidji Simo, Director of Product at Facebook, had combative exchanges with reporters at an event to promote Facebook Watch in Beverly Hills on Wednesday

Ricky Van Veen, Head of Global Creative Strategy and Fidji Simo, Director of Product at Facebook, had combative exchanges with reporters at an event to promote Facebook Watch in Beverly Hills on Wednesday

Veronique Pozner's (pictured) six-year-old son, Noah, died in the December 2012 Newtown shooting massacre

Veronique Pozner's (pictured) six-year-old son, Noah, died in the December 2012 Newtown shooting massacre

Leonard Pozner (left with Noah) and Veronique Pozner’s (right) six-year-old son, Noah, died in the December 2012 Newtown shooting massacre. They wrote a letter to Zuckerberg saying they were being harassed on Facebook by conspiracy theorists 

Other parents of Sandy Hook victims and people affected by other mass shootings, including the one that killed 17 people at a Florida high school, have made similar requests of Facebook, Twitter and other social media companies.

Zuckerberg raised eyebrows in an interview with Recode last week when he said he finds denial of the Holocaust ‘deeply offensive’ but doesn’t believe such content should be banned from Facebook. 

‘What we will do,’ he said, ‘is we’ll say, ‘Okay, you have your page, and if you’re not trying to organize harm against someone, or attacking someone, then you can put up that content on your page, even if people might disagree with it or find it offensive.”

He also said in the interview that the claim the Sandy Hook shooting didn’t happen is false.

‘I also think that going to someone who is a victim of Sandy Hook and telling them, ‘Hey, no, you’re a liar’ – that is harassment, and we actually will take that down,’ Zuckerberg said.  





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