Published: Sat, July 28, 2018
Money | By Bruce West

Facebook Stock Decline Is Largest One-Day Drop in U.S. History

Facebook Stock Decline Is Largest One-Day Drop in U.S. History

"Certainly, the frequent references to the other platforms available such as Instagram and the new revenue metric of how many people use at least one of the Facebook apps each month send a message that this is a company looking to find ways of becoming more than just a social media platform".

Shares in Facebook tumbled 19 per cent on Thursday on the United States' Nasdaq exchange to close at US$176.26 ($259.80) after sales and growth forecasts reported a day earlier, after normal trading closed, disappointed investors. 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.

The plunge came after Facebook executives said the company expected a significant slowdown in its revenue growth in the years ahead.

His fortune tumbled by US$16.8 billion in late trading Wednesday, as shares of the social media giant slid 20 per cent at 5:37 NY on disappointing results. Make no doubt, a 42 percent growth figure is still extremely robust, and that is coupled with an 11 percent year-over-year growth in monthly and daily active users.

The sudden drop in Facebook stock was a result of the announcement of second-quarter earnings which did not meet the companies predicted numbers. This translates to a US$124 billion decline in market capitalization, which is the largest ever loss of value in one day for a USA traded company. "It just seems like the magnitude is beyond anything we've seen".

When Facebook warned of slower growth it tipped the balance, sending the stock tumbling.

That could be down to the drop being a one-off, potentially following the Cambridge Analytica data sharing scandal, or even the sharing of private posts belonging to some 14 million Facebook users, rather than a downward spiral for Facebook.

While privacy was an issue in Europe, politics played a role in North America, which is the company's most lucrative advertising market.

Facebook CEO Mark Zuckerberg's net worth plummeted more than $15 billion with the stock dive, although it's still around $67 billion, according to Forbes' real-time net worth tracker. Even so, if Facebook is legitimately investing the time and money in improving privacy at the cost of slowed growth, it should all be to consumer benefit in the end.

Ben Bajarin, an analyst at Creative Strategies, calls this "new territory" for Facebook. "In previous years, companies were not valued as highly as Facebook is, so their losses were smaller".

Some analysts however said it was too soon to write off Facebook or its growth prospects, and that the company may have simply been warning of the worst-case scenario.

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