How would it feel to lose US$16 billion in a day?
Well, just ask Mark Zuckerberg. Last Wednesday (July 25), Facebook shares dropped by 19% and as one of the major shareholders, Zuckerberg lost US$16 billion. Granted, US$16 billion is not a lot for one of the richest people in the world. However, the shocking 19% drop has become one of the biggest ever one-day wipe out in U.S. stock market history. This is mostly the result of news about stalling growth and increased spending in the near future.
Why is this significant?
In light of the Cambridge Analytica revelations, Facebook has come under a lot of pressure to ensure that the privacy of its users are protected. As such, the company has been hiring and will continue to recruit more staff to deal with the various privacy scandals. The increased hiring will eventually affect the company’s profit and is perhaps a reason for the shocking 19% drop.
However, this decrease needs to be put into perspective. While such a great drop in share price is out of the ordinary, Facebook’s share prices are still comparable to when the Cambridge analytica scandal shocked the world back in early May. Meaning that this drop isn’t completely unheard of.
It seems that any indication of less than stellar growth levels can drive stock level plummeting. Netflix also saw a drop in share prices when it revealed that its subscriber numbers were falling behind market expectations. Additionally, when Twitter’s monthly users dropped by a million, their shares started to fall too.
Between satisfying advertisers and protecting user data, many of the problems with social media websites still exist and companies and governments are grappling with how to deal with this new social domain.