Thursday, 18 October, 2018

Facebook shares down more than 18 percent

Facebook loses one million EU users to GDPR Facebook loses one million EU users to GDPR
Cristina Norman | 28 July, 2018, 19:47

The results spelled out disaster for its market value, despite the company heading into Wednesday with a share price of $217.50.

That means that in one day, just the decline in Facebook's market value is roughly the entire market value of McDonald's or Nike, give or take a few billion. On Thursday, he lost $17 billion of his fortune, Facebook shares dipped nearly 20 percent, and now, some shareholders want his influence on the company reduced.

Facebook saw slower daily active user growth that grew by only 22 million, which is pretty bad considering the last time Facebook saw these numbers was all the way back in 2011. Microsoft dropped $80 billion in 2000 as well.

The proposal, which reflects the strong feeling among Facebook investors that governance changes are essential, was written by Trillium Asset Management, which manages around $11 million (£8.4 million) in Facebook stock.

More likely, though, market buzzards are holding off because of how quickly some analysts are turning on the company. Their median target price is $US219.30.

Still, investors weren't prepared for numerous bombshells dropped by Facebook Chief Financial Officer David Wehner.

Or the situation could showcase the potential for GDPR to mess things up, as it would appear that European Union citizens are becoming more concerned about their data privacy. That surprised investors because of the belief that the new laws wouldn't hurt revenue. In previous years, companies were not valued as highly as Facebook is so their losses were smaller.

The new regulations are also affecting user growth in the region because of the impact of requiring consumers to opt-in to Facebook and to linking their accounts to third-party websites, Pachter said. In March, the company's handling of user data in the Cambridge Analytica scandal contributed to a backlash against the size and reach of the biggest tech businesses and raised concerns that regulators may soon crack down on these firms. These tech giants were viewed as having almost unassailable revenue streams that could deliver profit growth regardless of economic conditions.

Even so, if Facebook is legitimately investing the time and money in improving privacy at the cost of slowed growth, it should all be to consumer benefit in the end. Yet both categories are facing headwinds.

"As we have written about extensively, the advertising industry - and digital advertising no less - has limits to growth, which we think is the primary factor constraining Facebook's revenue opportunity", Wieser said in a note after the earnings. The lower the operating margin, the less profitable the business.

But shares slumped seven percent in after-hours exchanges after hitting record levels in official trading, with the quarterly report largely weaker than had been expected.

And in the view of BTIG analyst Rich Greenfield, Facebook is making an investment that will pay off down the road. "Instagram has over 1 billion users, and all Facebook apps (Facebook, WhatsApp, Messenger, and Instagram) have 2.5 billion unique monthly users".

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