Published: Sat, July 28, 2018
Money | By Michele Stevens

Facebook market value plunges $119 billion

Facebook market value plunges $119 billion

Facebook Inc's shares lost as much as a quarter of their value on Wednesday (Jul 25) after executives said that profit margins would plummet for several years due to the costs of improving privacy safeguards and slowing usage in the biggest advertising markets.

Those numbers are not just for its main Facebook site, but also across apps like Instagram and Whatsapp which are expected to have been behind the majority of the company's user growth.

"Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4".

Assuming 484 million shares outstanding, as indicated in Amazon's second-quarter financial statements, this would put the company's market capitalization at $1.06 trillion. Its $1.74 earnings per share beat expectations of $1.72.

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Much of the latest drop in value has come from Facebook insiders selling more than $4bn worth of stock since details of the Cambridge Analytica data-mining scandal surfaced.

The Trillium Assets proposal charged that the lack of an independent board chair and oversight contributed to Facebook "missing, or mishandling, a number of severe controversies", including the social media site being used for the Russian meddling in US elections, the sharing personal data of 87 million users with Cambridge Analytica, proliferation of fake news and others, the Business Insider said.

During the call, Facebook's stock dropped precipitously.

The plunge came one day after the firm missed revenue forecasts for the second quarter and warned that growth would be far weaker than previously estimated.

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"As we have written about extensively, the advertising industry - and digital advertising no less - has limits to growth, which we think is the primary factor constraining Facebook's revenue opportunity", Wieser said in a note after the earnings. But perhaps most damaging of all, the company warned of a growth slowdown.

"Founder and CEO Mark Zuckerberg has said that he has no intention of letting Facebook become a platform known for celebrating humanity's worst impulses". In addition, Facebook said its daily active users rose 11 percent from a year earlier to 1.47 billion, compared with 13 percent growth in the previous quarter. The company is also contending with European privacy rules that went into effect in May. This year alone Apple is up some 15 per cent; Alphabet has gained more than 20 per cent; Amazon has surged more than 50 per cent; and Netflix is up almost 90 per cent.

As for Facebook, it actually made money in the quarter, just not enough to appease Wall Street. Eastern time. Snap's shares were down by more than 2 percent. Traders are bracing for a decline in tech stocks when the markets open Thursday.

Wehner gave three different reasons why the company's revenue growth would decline: currency headwinds, greater investments in new kinds of content-sharing, like disappearing videos, and greater user control over privacy - a direct response to criticism the company has fielded.

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