Could Facebook Stock Plunge 50 Percent?

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Written by Dana Sanchez

Facebook’s stock got hammered Monday after reports that Cambridge Analytica, a firm working for President Donald Trump’s 2016 campaign, used data from up to 50 million Facebook users without their permission.

Today, stocks continued to slump for the social media giant after a report that the Federal Trade Commission will investigate Facebook’s handling of user data, LA Times reported.

Monday’s sell-off saw Facebook shares nosedive 6.8 percent, wiping out more than $36 billion in value, which led a broader stock rout that pushed the Dow Jones industrial average back into negative territory for the year, according to Washington Post.

Facebook founder Mark Zuckerberg must act fast to address the Cambridge Analytica situation or risk losing investor support, Brian Sozzi wrote in an opinion piece in The Street:

“Why couldn’t Facebook’s stock plunge 50 percent, maybe not in a single day but over the course of six months? The answer is that there is nothing preventing it from happening. What you saw with the 7 percent dive on Monday was speculative trades being unwound. What gets Facebook’s stock into free-fall is lost confidence on the part of major institutions — lost confidence in leadership (Mark Zuckerberg may hiding in his office right now in a stinkie hoodie, while Sheryl Sandberg’s Instagram suggested she may be running for president instead of guiding Facebook through this) and lost confidence in a business model that has minted money for years.

Facebook’s top three institutional holders are a who’s who of long-term minded investors: Vanguard, BlackRock and FMR hold a collective 18 percent of Facebook, according to Bloomberg data … these three holders aren’t liquidating their holdings overnight (if at all), but if the terrible news flow continues their inevitable selling could put severe pressure on Facebook’s stock. That, in turn, could cause other institutions to sell. Then down 50 percent becomes a reality. “

Members of Congress from both parties seem keen to call Facebook executives to the carpet, Washington Post reported. They want to know how the Trump campaign got so much access to user information.

This is Facebook’s biggest test ever, Matt Rosoff reported for CNBC. Lack of leadership could sink the company. Facebook is losing users. Its reaction to a year of scandal has ranged from “defensive cluelessness” to “aloof silence,” he said.

Executives are selling shares including Zuckerberg, who plans to sell almost $13 billion worth of  by mid-2019.

There’s lesson from past tech declines,  Rosoff reported:

“The actions of Facebook execs now recall how execs at Nokia and Blackberry reacted after the iPhone emerged. Their revenues kept growing for a couple years — and they dismissed the threats. By the time users started leaving in droves, it was too late. There’s no outside attacker bringing Facebook down. It’s a circular firing squad.”

Facebook stock
Image: Anita Sanikop

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