Black Thursday for Facebook: why the company fell in price by a quarter in a few hours

Today, Facebook may experience the largest investor flight in its history. after the close of the main trading in New York, After the publication of the results of the second quarter, which seemed to the market a failure, the company's capitalization collapsed by 24% this is a gap of $151 billion in money, and almost $17 billion in Mark Zuckerberg's fortune. trading on Thursday, investors will not calm down, the social network can survive the largest drop among American companies in the history of the US stock market. Following Facebook, the capitalization of other technological giants began to decline.

• At first glance, there is nothing critical in Facebook's quarterly results - the company's net profit grew from $3.89 to $5.12 billion year-on-year. But analysts expected more, and you already understood what the first reaction of investors was.

Here are the top five reasons for frustration, according to TechCrunch:

1. the lowest growth rate of the user base - 1.54% against 3.14% in the first quarter of 2018;
2. decline in the number of users in Europe (from 377 million to 376 million) and no growth in North America (241 million people);
3. the forecast of falling revenue in the second half of the year - quotes collapsed immediately after the company's financial director David Weiner admitted on a call with analysts that growth rates will continue to slow down;
4. tightening of European legislation in the field of data protection;

5. the introduction of unpopular among advertisers types of content delivery (like stories).

6. Bloomberg writes that this is how Facebook is paying for numerous scandals related to the leakage of data of millions of users.

7. Not the best day today, it looks like other technology giants will also have: following the sale of Facebook in the postmarket, Twitter lost 6.5%, Netflix - 3.6%, Alphabet - 2.4%, Amazon - 2.5%, Apple - 1.6%.

Context

• For Facebook, such falls are very rare , notes Bloomberg. The last time the company's revenue declined was at the beginning of 2015.
• The record drop in the company's value in 2018 was preceded by scandals related to the leakage of data from 87 million social network users to Cambridge Analytica, as well as the tightening of European legislation in the field of user data protection.
• After media publications about Cambridge Analytica, Facebook management did not immediately respond adequately - for several days the head of the company, Mark Zuckerberg, and his team simply remained silent, but after that they made a number of mistakes in public communication. The scandal cost the company dearly - turned their backs on Zuckerberg. even some colleagues in Silicon Valley
• Zuckerberg promised to correct his own "huge mistakes". If we talk about capitalization, which in the first days after information about the leak collapsed by $ 50 billion, then Facebook took less than two months to recover from the scandal - in May, the company's value returned to pre-crisis levels. The improvement of the company's reputation was influenced, among other things, by Zuckerberg's confident performance at hearings in the US Senate.
• Not all tech companies had a bad second quarter. Google, on the contrary, reported strong growth despite the same European legislation on user data protection. Google's capitalization after the publication of financial statements increased by 5.3% at once.

It is worth following how events will develop today after the start of trading, if only because for many months now economists, financiers and large investment banks have been preparing for the beginning of the end. And some even

Liana Faizova