Facebook suffers record-breaking $100bn-plus market value plunge
Image credit: reuters
More than $100bn has been wiped off Facebook’s market value in the space of a day, following bad news for the company in China and Europe.
Facebook recently published its earnings report for the second quarter of 2018. While it made a not-too-measly $13.2bn (£10bn), it also revealed that growth had almost completely stalled in the US and Europe, losing three million users in Europe alone following a series of scandals and missteps (most notably the Cambridge Analytica scandal, in which data from 87 million Facebook users was harvested to refine targeted political advertising algorithms).
The company warned investors that growth would slow over the next year as changes were made at Facebook, such as the decision to offer users more data protection options. Mark Zuckerberg, CEO and co-founder of Facebook commented that: “We are investing so much in security that it will have a significant impact on our profitability […] we are starting to see that this quarter.”
Horror at its earnings report and warnings caused shares to fall – and continue to fall – in value by 19.5 per cent overnight, wiping more than $120bn (£91bn) off its overall market value. Facebook is on track to suffer the largest ever single-day drop in a company’s market value.
Zuckerberg himself took a hit of $14.5bn overnight, tragically reducing him from the third-richest person in the world to merely the sixth-richest person.
Meanwhile, the Chinese government withdrew its approval for Facebook to open a £30m “innovation hub” in Hangzhou, in another blow to the company. Zuckerberg has made it a personal mission to woo government and industry in China – where Facebook is banned – with frequent visits and efforts to learn to speak Mandarin.
While the creation of the hub would not have resulted in Facebook becoming accessible in China, it would have established a strong presence for the company in the world’s largest market after the US. A report by the New York Times suggested that the withdrawal of approval may have been as a result of the Cyberspace Administration of China – the Chinese internet watchdog – not having been consulted about the plans.