Why Did Facebook Loose Billion Dollars On 2018
In what has been a difficult year for Facebook, the decrease comes after yet another big controversy. The IT company's stock has dropped almost 40% from its July high.
Facebook shares are being crushed, according to three analysts.
Nation of Commerce
Here's a rundown of the many blunders, controversies, and other events that sent Facebook's stock price into its current downward spiral in 2018.
Changes to the News Feed
The first significant drop in Facebook's stock price occurred in January, when the firm announced substantial changes to one of its most popular products, news feed. Material from consumers' friends and family was given precedence over content from businesses they followed.
As a consequence, CEO Mark Zuckerberg predicts that users' time spent on Facebook will decrease, as will their engagement with the site. The company's stock price dropped more than 4% on Jan. 12 as a result of the warnings, sending Wall Street into a frenzy. The decrease reduced Facebook's market value by $24.5 billion, more than Twitter's entire worth.
Cambridge Analytica is a company that specializes in data analysis.
When the New York Times and The Guardian revealed in March that Cambridge Analytica, a British political consulting company, had used Facebook to gather the data of more than 50 million users without their consent, Facebook shares plummeted. In2016, the Trump campaign utilized Cambridge Analytica to target voters.
Facebook attempted to prevent the allegations by suspending the consulting company on March 16, but the stories continued to have an effect. On the following trading day, March 19, the company's stock plummeted almost 7%, and Facebook's market worth dropped by more than $36 billion, roughly double the entire market cap Snap had at the moment.
Zuckerberg accepts the offer from Washington.
When news emerged on March 27 that Zuckerberg had chosen to appear before Congress, Facebook's stock dropped almost 5%. Following the Cambridge Analytica incident, Facebook was under increasing pressure to make a choice. The Federal Trade Commission had just stated that it will examine Facebook's data practices the day before.
The day lost Facebook approximately $23 billion in market capitalization. That's almost three times the value of Macy's at the time.
Facebook's community guidelines are revealed.
On April 24, Facebook's stock dropped almost 4% after the firm released new guidelines outlining what material is and is not permitted on its social network.
The Community Standards were released as Facebook worked to remove harmful material from its services, such as disinformation, hate speech, and spam. One day before Facebook's first earnings report since the Cambridge Analytica controversy, the paper was made public.
That day, Facebook's market value plummeted to roughly $18 billion, a bit more than Dish Network's entire worth at the moment.
Exodus of senior executives
Throughout2018, Facebook has lost a slew of high-ranking executives. The impact of these departures on the company's stock price is difficult to measure, but one in particular had considerable influence.
The first was the departure of Jan Koum, WhatsApp's co-founder. The company's stock price dropped almost 1% on April 30 after Koum announced his departure. After selling WhatsApp to Facebook for $19 billion in 2014, Koum became one of the social network's top stockholders.
That day, Facebook's market capitalization plummeted by almost $5 billion, the equal of Foot Locker's entire worth at the moment.
Following GDPR, it's been a difficult quarter.
On July 26, one day after reaching a high of $217.50, Facebook saw its largest decline of the year. Following the publication of Facebook's second-quarter earnings on July 25, the stock dropped almost 19 percent, below analysts' expectations on key measures such as revenue and advertising forecasts.
On the company's results call, management cautioned that sales growth rates would be lower than a year ago, exacerbating the shortfall. In addition, the firm provided alarming numbers for its most significant markets.
Following the implementation of the General Data Protection Regulation (GDPR), Europe's stringent new data privacy legislation, Facebook's daily user base stayed steady in the United States and Canada while declining by 3 million daily users in Europe.
Following the announcement, the company's worth dropped by roughly $120 billion, or slightly less than Nike's entire market valuation at the moment.
Senate hearing for Sheryl Sandberg
The week after Facebook COO Sheryl Sandberg appeared before the Senate Intelligence Committee, the stock dropped again. Sandberg was in attendance to explain Facebook's response to Russian interference and what the business is doing to avoid future abuse of its services.
Sandberg's testimony did not impress Wall Street since she repeatedly promised to follow up on senators' queries. Sandberg's interaction with Sen. Kamala Harris, in particular, stood out, as the senator pressed Sandberg on how Facebook could have profited financially from Russian trolls utilizing the platform.
From the close on Aug.31, the trading day before Sandberg's opening remarks, to the close on Sept.6, the day following the hearing, Facebook's stock dropped almost 8%. The company's market worth plummeted by $38 billion, a fraction of Delta Airlines' entire market cap at the moment.
Instagram's founders have passed away.
Instagram co-founders Kevin Systrom and Mike Krieger abruptly resigned from Facebook on September24, in a similar incident to Koum's April departure. Since Facebook bought Instagram in 2012, the two had stayed at the business, which is now the most popular social network among teenagers.
The company's stock dropped by 0.3 percent the next day.
The breach of security
On Sept. 28, Facebook said that it had experienced a security incident that may have affected up to 50 million users. That day, the company's stock dropped almost 3%.
Only 30 million individuals were impacted, but 14 million had their names, contact information, gender, relationship status, and other sensitive information exposed, the firm explained a few weeks later.
That day, Facebook's worth plummeted by almost $16 billion, nearly equaling Alaska Airlines' market capitalization.
The problem at the public relations company
The recent decline in the stock price has been going on since a New York Times article on Nov. 14 that revealed Facebook's attempts to restrict public discourse surrounding its social network's many issues, including its inability to prevent Russian interference in the 2016 U.S. election.
The study, in particular, revealed Facebook's collaboration with Definers Public Affairs, a Washington-based opposition research company. The firm hired Definers Public Affairs to create stories attacking competitors Google and Apple's business practices while downplaying the complaints of Facebook's. The CIA also misled the public by claiming that liberal billionaire George Soros was financing an anti-Facebook organization.
Facebook has severed connections with the agency since the revelation, and CEO Mark Zuckerberg has made himself accessible to the press to address concerns, but the company's stock price has continued to plummet.
From the close on November 14 to the close on Monday, the company's stock dropped almost 9%. Facebook's market worth dropped more than $36 billion as a consequence of the decline, somewhat less than Ford's entire value.