$120bn Wiped Off From Facebook’s Market Value, Share Price Plunges

Last Thursday, Facebook has opened in the US markets at a loss of nearly 20 percent, wiping approximately $123 billion (£93.8 billion) off the market valuation of the company.

The loss of Facebook is over seven times the valuation of Snap ($17 billion), and nearly four times the valuation of Twitter ($33 billion). It is almost equivalent to the total GDP of Kuwait, which was $120.3 billion during the previous year.

An earnings call late last Thursday night discussed that Facebook recorded zero growth in its user numbers across North America, and lost some users in Europe by around 1 million. During after-hours trading, the share price of the company dropped by as low as 24 percent.

In its second-quarter results, the social media titan disclosed that the numbers of its monthly active user across all of its platforms had increased to 2.23 billion at an increase of only 11 percent, coming short of the consensus estimates that amounted to 2.25 billion as polled by Thomson Reuters.

The said numbers are not only for its main Facebook site but also across its owned apps such as Whatsapp and Instagram which are assumed to have been behind the majority of the user growth of the company.

As an outcome of the implementation of the General Data Protection Regulation last May, together with being affected by the Cambridge Analytica scandal, Mark Zuckerberg, the CEO and founder of the company, said that the Facebook is “investing so much in security that it will significantly impact our profitability.”

The statement was evident in the 50 percent rise in costs year-on-year for the quarter.

The chief investment officer at J. Stern & Co., Christopher Rossbach, stated: “The guidance from management over their expectations for revenue growth to decelerate so markedly for the rest of the year did take us, and the market, by surprise.”

He added: “The share price decline of 20 per cent after hours is relatively understandable given the strong run over the last couple of months, and indeed over the last five years.”

Rossbach said that it is “probably unlikely” that the share price of Facebook will be able to recover quickly, because of a resetting of expectations that the investors will take time to digest.