Arthur J. Villasanta – Fourth Estate Contributor
Menlo Park, CA, United States (4E) – Facebook made financial history in the worst possible way, losing $119 billion of its value on Thursday in the biggest one-day loss by a listed firm in U.S. stock market history.
Facebook shares plummeted by $41.24, or almost 19 percent, to $176.26 a day after the company reported depressing results in a conference call with investors. Facebook’s stock market plunge greatly exceeded Intel’s $91 billion single-day loss in September 2000. To put it in perspective, Facebook’s mammoth tumble is more than value of Starbucks, UPS and Goldman Sachs combined, said one market analyst.
“We’re investing so much in security it will significantly impact our profitability,” said founder and CEO Mark Zuckerberg to explain the disappointing operating results. He also said Facebook is combating the implacable fake news plague and privacy violation issues like the Cambridge Analytica scandal.
Facebook’s stock plunged after the company’s second-quarter earnings report revealed lackluster results. Facebook admitted revenue and subscriber growth missed Wall Street’s expectations, and warned of slowing growth ahead. Facebook’s market cap was down by as much as $148 billion before recovering later in the day.
On Wednesday, Facebook reported revenue of $13.23 billion, up 42% year-on-year, but lower than the $13.3 billion predicted by analysts. It revealed it has 2.23 billion monthly active users , up 11% year-on-year as against the expected 2.25 billion predicted. Of this total, 1.47 billion are daily active users, an 11% year-on-year rise. Earnings per share (EPS) came to $1.74, slightly higher than the expected $1.72.
Droves of growth-hungry investors began unloading their shares after Facebook’s forecast showed the number of its active users will more slowly than expected. Facebook is also dealing with Europe’s new privacy laws. The report was Facebook’s first full quarter since the Cambridge Analytica scandal.
CFO David Wehner that European advertising revenue growth “decelerated more quickly than other regions,” partially because of the new European privacy laws. This revelation shocked investors who were led to believe the new General Data Protection Regulation (GDPR) laws wouldn’t hurt revenue. GDPR were only in effect for one month of the quarter, which means the company may feel more of an impact in the current quarter.
“The implementation of GDPR gave a large number of Facebook users control over their privacy, and it should have been patently obvious to investors (and to us) that allowing users control would result in slightly lower engagement,” said Wehner, alluding to GDPR. Wehner believes GDPR may end up favoring Facebook and other large companies over the long-term.
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