Wall Street punishes scandal-hit Facebook

Wall Street punishes scandal-hit Facebook

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 p.m.in NY on disappointing results. It was among the largest one-day losses of market value in USA stock market history.

The company warned its investors that a huge financial injection would be required to buttress the business to address the controversies it's now facing, with revenue growth expected "to decline by high single-digit percentages from prior quarters". In the second quarter, Facebook had 279 million daily users in these countries, down from 282 million in the previous quarter, Recode reported.

The company also said that revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns, would not be enough to fix the damage.

Expenses will rise by 50% to 60% this year as Facebook invests in data security, new technology and other initiatives, CFO David Wehner said.

After the Cambridge Analytica data scandal, Facebook suspended Boston-based data analytics company Crimson Hexagon over concerns that it harvested users' data. But the results followed a period in which data-privacy issues came under harsh scrutiny, with Chief Executive Officer Mark Zuckerberg testifying before U.S. Congress for hours on the company's missteps.

The losses shaved about $100 billion off of the social media giant's market cap, and this also hit founder Mark Zuckerberg's net worth. Its $1.74 earnings per share beat expectations of $1.72.

Like this story? Share it with a friend!

Asian shares dip, drama in Japanese bond market
The Shanghai Composite index was 1.6 percent higher at the midday break and the blue-chip CSI300 index gained 1.7 percent. Reactions in financial markets were widespread , as US Dollar related assets pinballed in line with the greenback.

Facebook has also said it wanted to hire 20,000 people by the end of 2018 to help review content posted on the site and to work on its security team.

Normally, a drop that steep in a company so high profile would bring out bargain hunters, investors who see the opportunity for a quick profit in a popular stock. Global monthly active users hit 2.23 billion as of June 30, up 11% year-over-year.

Ben Bajarin, an analyst at Creative Strategies, calls this "new territory" for Facebook.

"We are much more confident that we are going to get this right in the elections in 2018", he said, adding that the company had begun proactively looking for fake accounts. All users had to affirm consent to its data collection practices before being allowed to continue to use Facebook.

"The Teflon has been scratched away", said Bob O'Donnell, head of Technalysis Research.

The "Dispatches" show featured an undercover reporter who went to work at Irish staffing firm CPL Resources, which acts as Facebook's largest centre for United Kingdom content moderation.

Dismal revenue, which initially pulled the stock down almost 9 percent on Thursday, clearly was not the end for wounded investors.

Related Articles