Facebook suffers $119B hit in value
Facebook faced a day of reckoning as its shares plunged Thursday in the company’s worst trading day since going public in 2012.
The 19 percent drop in Facebook shares vaporized $119 billion of the company’s market value in the largest one-day loss in market history. CEO Mark Zuckerberg alone saw his net worth fall by roughly $16 billion as a result.
In a sign of just how bullish investor expectations had been running, though, the collapse 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.
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 furor over the political consulting firm with ties to President Donald Trump, which improperly accessed the data of tens of millions of Facebook users.
Shares closed down almost 19 percent, at $176.26.
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.
At times, it has seemed as though Facebook can’t quite decide where its values really lie. For instance, it continues to straddle the line between policing what users say and remaining a neutral platform in an increasingly divided world, and between protecting privacy while collecting as much information on its users as possible.
Facebook had 2.23 billion monthly users as of June 30, up 11 percent from a year earlier. Analysts were expecting 2.25 billion, according to FactSet. User growth – both on a monthly and daily basis – was flat in the U.S. and the rest of North America, while it declined slightly in Europe.
Facebook has largely saturated in the U.S. and Western European markets, and is now looking to countries such as Brazil, India and Indonesia for new users. Revenue from these regions, however, is far below what Facebook rakes in from the U.S. and Europe.
The company earned $5.1 billion, or $1.74 per share, up 31 percent and above analysts’ estimates of $1.71.
But revenue – up 42 percent to $13.23 billion – was slightly below the $13.34 that Wall Street was expecting.