Facebook is sued after stock plunge

Ann Santiago
August 1, 2018

Facebook Inc and its chief executive Mark Zuckerberg were sued on Friday (July 27) in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about US$120 billion (S$163.43 billion) of shareholder wealth.

Facebook is also battling several other suits relating to the handling of user data in the Cambridge Analytica case. Although the sudden drop did not affect much on broader market, still the reactions made by investors and news channels were noticeable.

Zuckerberg, on Wednesday, July 25, 2018 lost $16.8 billion in nearly two hours as the Facebook shares tumbled. According to a report by Bloomberg, the 24 percent drop in Facebook's share valuation in after-hours trading is likely to be replicated in the normal trading session, which will cause Facebook's market capitalization to take a massive hit. Facebook revenue is still growing at a rate double that of Twitter.

Some analysts said Facebook's issues would not be easily resolved. For a company that generates revenue through targeted marketing that is heavily centered on personal data, this could turn out to be a big blow. This forced them to magnify the call for changes at the top. People are switching to a functionality that is less monetizable. There are more than 2.5 billion active users of Facebook that provides unique value for investors as well as advertisers. Furthermore, the growth in the number of daily average users is slowing down as well.

The $15.8 billion in net worth that Zuckerberg stands to lose in the move is equal to the wealth of the world's 81st-richest person, now Japanese businessman Takemitsu Takizaki, according to Forbes real time data.

Those numbers are not just for its main Facebook site, but also across apps like Instagram and Whatsapp which are expected to have been behind the majority of the company's user growth.

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