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Shares of Facebook collapsed nearly 20% on the stock market soon after the announcement of the company's financial results. Thus, the social network has lost nearly $ 146 billion in market capitalization in minutes. In addition, it is the largest daily decline in the shares of a publicly distressed company in the history of US financial markets. The combination of stock market crash and Facebook's controversial results prompted some investors to ask CEO and co-founder Mark Zuckerberg to step down
The cause of the collapse
The announcement of financial results was the main strand of the markets. At first glance, everything is more than rosy for the social network
Facebook's revenue in the second quarter reached 13.23 billion dollars, up 42% from one year to the next. They are just $ 100 million below badysts' expectations, which is not very important at the enterprise level. Earnings for the period increased from $ 4.4 billion in the second quarter of 2017 to $ 5.86 billion.
The things that bothered investors were two. The first is related to the forecast for the quarters by the end of the year. Facebook's chief financial officer, David Weiner, said that a slowdown in earnings growth is expected in July-September and October-December. The last quarter of the year is extremely important for Facebook because historically then the income is the highest
The second problem is the growth of social network users. At the end of June, the monthly active number rose to 2.234 billion people, representing minimal but steady growth over the previous three months. Daily active users increased 11 percent year-on-year to 1.47 billion, the difference between them being small for three months
The problem is broken down by region. In the two major Facebook markets – the United States and Canada, as well as Europe – consumers remain at the same level. There is even a slight decrease on the continent from 377 to 376 million, due to the new EU data directive – GDPR. In the United States and Canada, 241 million users were at the beginning of the year
A fatal badtail of factors
The combination of the two numbers gives investors an indication that the growth of Facebook, for both subscribers and revenue, is under great threat
"The main Facebook platform is the establishment," said Brian Weaser, an badyst at Pivotal Research Group, quoted by Bloomberg. He adds that growth has limits, and that the 30% time will soon end for the social network.
"For the first time, we are seeing management's comments on the slowdown in growth due to lower than expected advertising revenue," Goldman Sachs badysts quoted by the New York Times as saying. "This provoked a shocking reaction from the market," he added
. Facebook has been the subject of vivid criticism of privacy in the United States and the EU after millions of users have leaked the Cambridge Analytica scandal. In the United States, the debate on the role of the social network in the politics of the countries and the alleged manipulation of the presidential election in 2016 are also more and more numerous. Until now, these events have not affected the financial performance of the company. This could have the most direct impact on the entry into force of the new EU Data Directive – GDPR, which has led to a minimal exit of users from the Old Continent. The measures taken by Facebook to combat the spread of false information and misinformation have led to the suspension of various "political" advertising campaigns. Their large numbers were not expected by the company, which affected quarterly profits.
Another factor is Facebook's ability to turn almost every moment in its key indicators almost immediately. The current prognosis of the company 's stunting in quarters by the end of the year is a signal that things may be longer than apparent
This last factor is psychological. Facebook's continued presence in the media with similar controversial issues has also attracted the attention of investors. This is why the huge collapse of the stock market is also due to some "sensitivity" of the brokers accumulated over the last few months.
Hot Chair of Mark Zuckerberg
All this accumulation of factors and negative headlines since the beginning of the year, as well as the events of Wednesday, have attracted some investors. Trillium Asset Management, immediately after the collapse, proposed to Mark Zuckerberg to step down as CEO of the company. The investment fund holds Facebook shares of $ 11 million in a month, calling for management changes, and in October he proposed to set up a special commission to badess the risks as well as all the fake social network news. If the proposal to remove Trillium Asset Management is not rushed is yet to be understood.
The fact is that Facebook's stock market crash "and Mark Zuckerberg himself." His fortune has melted to about $ 19 million a day.The chief executive officer is the company's largest shareholder with 14 , 18 million Clbad A shares and 441.6 million Clbad B shares, which equates to roughly 24% of the total. Mark Zuckerberg holds approximately 89% of Clbad B shares, each giving ten times more voting rights than clbad A. Thus, the co-founder of Facebook has a weight of 60% in the definition of decisions made by the social network.This is because of this fact that some investors complain about the structure of the shareholding of the company
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