Facebook's 20%, $120B 1-day stock drop worst in U.S. history

Friday, July 27, 2018
 | 
Michael F. Haverluck (OneNewsNow.com)

Facebook CEO Mark ZuckerbergIn the midst of fake news and data breach scandals, Facebook CEO Mark Zuckerberg’s net worth plummeted in one day by more than $16 billion as his social media giant recorded an unprecedented 20-percent, $120 billion single-day stock plunge – the largest drop in United States history.

Facebook reported worse-than expected second quarter results in the wake of its litany of recent problems, spurring the social media behemoth to issue a guidance alerting investors that its financial future is more dismal than many anticipated. At one point during the day, Facebook’s shares were reported by CNBC to have dropped by as much as 24 percent, as it was poised to lose a whopping $123 billion in market value.

In lieu of Facebook’s current multi-front crisis , one activist investor filed a proposal demanding that Zuckerberg be replaced as the firm’s chairman for “mishandling” the numerous crises beleaguering the company, according to a report by Fortune.

Sparking more outrage

Zuckerberg placed himself in the midst of yet another controversy after he received considerable backlash for justifying the lack of diligence Facebook demonstrated while handling offensive social media content posted by Holocaust deniers.

“I’m Jewish, and there’s a set of people who deny that the Holocaust happened,” Zuckerberg explained, according to Fox News. “I find that deeply offensive, but at the end of the day, I don’t believe that our platform should take that down because I think there are things that different people get wrong.”

He subsequently backtracked from this comment after it triggered widespread public outcry.

Of fake news and breaching client data confidentiality

Facebook’s ongoing struggle with producing fake news also continues to add to its woes.

“Earlier this week, the company was slammed by the parents of a Sandy Hook massacre victim for the hoax claims that emerged on the platform,” Fox News reported. “Facebook has also been sucked into the probe into alleged Russian meddling in the 2016 presidential election.”

Breaching customers’ trust by using and/or distributing their personal information is reportedly having more of a negative effect on Facebook’s subscriber base in Europe than in North America.

“The extent of the fallout from the Cambridge Analytica scandal and the new European privacy law – known as General Data Protection Regulation (GDPR) – is not yet clear,” Fox News’ Chris Ciaccia reported. “In the U.S. and Canada, Facebook's daily active users remained flat, sequentially, at 185 million, while the number actually fell in Europe, falling to 279 million – down from 282 million.”

The unwanted media attention Facebook received for its part in the Cambridge Analytica data sharing scandal has spilled into the platform’s dissemination of fake news, and Zuckerberg felt compelled to apologize for his company’s lack of professionalism and failure to maintain consumer confidence.

"We have a responsibility to protect your data, and if we can't, then we don't deserve to serve you,” Zuckerberg proclaimed, according to Fox News.

Dropping in dollars …

Zuckerberg’s status as one of the wealthiest men on the planet is dropping, and so is his company’s worth.

“[Facebook’s one-day drop boot[ed] him from the 3rd spot of the richest person in the world to the sixth spot,” TheBlaze pointed out. “As of Wednesday, Facebook Inc., lost over $100 billion in stock market value.”

Much ground has been lost in the short span of 24 hours – a fall from which Facebook will have to work hard to recover.

“Prior to Facebook's second-quarter results, Zuckerberg had a net worth of $77.6 billion, according to Forbes, [but] after the stock selloff, Zuckerberg's net worth fell to roughly $68.9 billion – making him worth less than Berkshire Hathaway CEO Warren Buffett.” Ciaccia noted. “Facebook's market cap has fallen roughly $120 billion – or the amount General Motors, Ford and Target are worth … combined.”

Facebook Chief Financial Officer David Wehner commented on his company’s earnings during a conference call, announcing that the social media giant’s sales growth is expected to fall over the next two quarters while continues to invest its money in privacy and prioritizes new formats, such as “Stories” – a popular feature used by Instagram.

"We plan to grow and promote certain engaging experiences like Stories – that currently have lower levels of monetization – and we are also giving people who use our services more choices around data privacy, which may have an impact on our revenue growth," Wehner explained to associates, according to the Fox News report.

Shaky future

Even though things are currently looking dismal for Facebook, there are a handful of Wall Street analysts who are holding to a positive outlook for the company, even though they conceded that the abysmal second quarter results were worse than anticipated – not to mention the fact that European privacy laws just went into effect at the end of May.

"Given this more cautious outlook, we are lowering our estimates and reducing our price target to $205 from $225," Monness Crespi Hardt Analyst Brian White announced Thursday in an investor note, according to Fox News. "However, we believe the magnitude of the decline in Facebook’s stock in after-market trading last night was an extreme overreaction – especially for a stock that we believe was already meaningfully undervalued. As such, we would be aggressive buyers of the stock on weakness this morning."

It was also noted that under the circumstances, the numbers for Facebook could be much worse.

“Facebook generated $13.23 billion in second-quarter revenue – up 42 percent year-over-year – though it missed analysts' estimates at $13.36 billion,” Ciaccia noted. “The company earned $1.74 per share, ahead of the $1.72 per share analysts were expecting. Shares of the Menlo Park, Calif.-based social networking giant had recovered some of their earlier losses, but were still trading down 19 percent to $176.10.”

But Facebook’s recent woes appear to be more than just a temporary bump in the road.

“[T]he number of daily active users on the platform – an important metric for judging the success of a website or app – only grew by 22 million – the lowest growth figure since 2011,” Breitbart News divulged. “Facebook’s Chief Financial Officer warned that revenue growth would ‘decline by high single-digit percentages’ until 2019.”

It wasn’t since the turn of the century nearly two decades ago that anything close to such a huge loss was registered in the U.S.

“In September 2000 – during the original dot-com bust – Intel lost $91 billion, while around the same time, Microsoft lost $77 billion in a day,” Breitbart’s Lucas Nolan recounted. “While it is true that Facebook’s loss of $119 billion in a day is the biggest one-day drop in U.S. stock market history, it should be noted that the large loss is partly due to Facebook’s massive valuation as a company. In previous years, companies were not valued as highly as Facebook is, so their losses were smaller.”

 

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