Facebook Inc. stock plunged as much as 20% Thursday after months of scandal and criticism finally hit the company where it hurts: growth.
As Bloomberg reports, the social-media goliath’s financial performance had previously seemed immune to fierce critiques of its content policies, its failure to safeguard private data and its changing rules for advertisers.
But on Wednesday Facebook reported sales and user growth numbers for the second quarter that fell short of analysts’ projections, leaving investors reeling.
The company’s shares fell the most in its history as a public company, wiping out more than $120 billion in market value. It marks the largest ever loss of value in one day for a U.S. traded company. The stock was trading at $175.72 as of about 10 a.m.
The company told Wall Street the numbers won’t get any better this year. Chief Financial Officer David Wehner said revenue growth rates would decline in the third and fourth quarters. Analysts who follow Facebook were blindsided, asking frequently on a conference call with executives for more information on exactly how the company’s financial future had changed so dramatically.
“I think many investors are having a hard time reconciling that deceleration,” Brent Thill, an analyst at Jefferies LLC, told Facebook executives, asking for a little more clarity on the reasoning. “It just seems like the magnitude is beyond anything we’ve seen, especially across a number of the tech (companies) we cover.”
For Facebook, financial stumbles are rare. The last time the company missed revenue estimates was the first quarter of 2015. But the results followed a period in which data-privacy issues came under harsh scrutiny, with CEO Mark Zuckerberg testifying before Congress for hours on the company’s missteps.
