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Facebook Still Down More Than $100 Billion In Value On Thursday In A Record Loss

Are the scandals, mishaps, and growing mistrust catching up to Facebook?

Last updated on July 26, 2018, at 10:42 a.m. ET

Posted on July 25, 2018, at 6:48 p.m. ET

Charles Platiau / Reuters

Facebook’s stock price had grown to all-time highs during a year when privacy scandals, public relations issues, and calls for increased scrutiny have plagued the company. That is, until this week.

On Thursday morning, Facebook shares were still down after plummeting the previous evening in after-hours trading. As of 11:05 AM in New York, the share price was down by 19.3%, wiping out more than $100 billion in market capitalization, a record one-day loss for a company on a US exchange. It is more than half of the total market loss — adjusted for inflation — during the Black Tuesday of 1929, which triggered the Great Depression. For comparison, Twitter is worth more than $32 billion, while General Motors has a market capitalization of about $52 billion.

The precipitous after-hours drop came during the company's second quarter earning call with analysts, in which CEO Mark Zuckerberg and COO Sheryl Sandberg tried to assuage fears over slowing revenue and user growth.

While Facebook has faced heavy criticism for its role in the Cambridge Analytica data scandal and has been investigated for its role in helping to spread Russian state-sponsored misinformation before and after the 2016 election, investors had not seen a slowdown in the company’s core financial metrics until Wednesday. And while the company reported a 42% increase in quarterly revenue to $13.2 billion, it missed Wall Street’s expectations by $200 million. More troublingly, it said it expected revenue growth rates to decline by “high single-digit percentages” in the third and fourth quarters of 2018.

Even the company’s vanity metrics couldn’t save it on Wednesday. During the call, Zuckerberg announced that 2.5 billion people use at least one of Facebook’s apps, including WhatsApp, Facebook Messenger, and Instagram, every day, but the figure seemed to fall on deaf ears after the company said user growth had slowed to a crawl. The company now has 1.47 billion daily active users, up from 1.45 billion, a 1.4% increase quarter over quarter, compared to a 3.5% increase in users in the previous three months.

Those figures suggest that perhaps the scandals, mishaps, and growing mistrust might be catching up to Facebook.

Down 23% now. I just want to emphasize, Facebook has NEVER fallen this much in response to an earnings report. If this change holds tomorrow, it'll be the biggest post-earnings decline ever

On the call, Zuckerberg sounded stoic, noting that the company recently doubled the size of its security and content moderation team to 20,000 and is better prepared to deal with the misinformation campaigns that plagued the 2016 election season. He simultaneously posted a message to his Facebook page noting that the company will continue to “invest heavily in safety and security.”

“We launched our tool to make political advertising much more transparent, including letting you see who any political or issue ad is targeting, how much they're spending and more,” he wrote. “Beyond this, we now have 20,000 people working on security and content review across the world. As I've said in past quarterly updates, we're investing so much in security that it will significantly impact our profitability.”

It’s unclear if that will be enough to appease lawmakers or investors. On Wednesday, BuzzFeed News reported that Sandberg, along with Twitter CEO Jack Dorsey and a high-ranking Google executive, are expected to testify before the Senate Intelligence Committee in September for its investigation into Russian interference. In April, Zuckerberg testified in front of a joint Senate committee hearing and later in front of House representatives to answer questions surrounding the disgraced political consulting firm Cambridge Analytica and its mishandling of user data.

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