Zuckerberg down $16bn as market 'unlikes' Facebook


Facebook founder and CEO Mark Zuckerberg's fortune took an almost $16bn (€13.7bn) hit yesterday, as it headed for the biggest one-day wipeout in US stock market history, a day after executives forecast years of lower profit margins.

The plunge in Facebook shares dragged global tech stocks lower - even though the social media giant's shares had peaked at an all-time high only this week.

After falling overnight on Wednesday, Facebook shares were down as much as 19.6pc at $174.78 each in early trading yesterday in the US, a decline that would wipe about $124bn off the company's value - or nearly four times the entire market capitalisation of Twitter.

Facebook is one of Ireland's biggest private-sector employers, with close to 7,000 staff in Dublin.

The social media giant has been dogged by a series of privacy and content scandals - the latest this month when an investigation by UK-based Channel 4's 'Dispatches' programme found disturbing posts, including violent videos involving assaults on children, remained on Facebook after being reported by users and reviewed by moderators.

The 'Dispatches' show featured an undercover reporter who went to work at Irish staffing firm CPL Resources, which acts as Facebook's largest centre for UK content moderation.

At least 16 brokerages cut their price targets on Facebook after managers said the cost of improving privacy safeguards, as well as slowing usage in the biggest advertising markets, would hit the company's profit margins for more than two years.

Facebook's second-quarter results were the first sign that a new European privacy law and a string of privacy scandals involving Cambridge Analytica and other app developers are hitting the company's business.

Facebook also warned that the toll would not be offset by revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns.

Describing the announcements as "bombshells", Baird analysts said the issues were to a large degree "self-inflicted" as Facebook sacrifices its core app monetisation to drive usage.

Of 47 analysts covering Facebook, 43 rate the stock as 'buy', two rate it 'hold' and two rate it 'sell'. Their median target price is $219.30 a share.

Moffett Nathanson analysts called the company's forecast "either the new economic reality of their business model or a very public act of self-immolation to stave off further regulatory pressure".

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

Some analysts said Facebook's issues would not be easily resolved.

"Unlike Netflix, whose quarterly shortfall we saw as temporary, here we see an evolution of the story, albeit a portion of which we expected," said Daniel Salmon, analyst at BMO Capital Markets.

Others, however, saw a silver lining in Facebook's emphasis on more engaging content and its promotion of stories on its News Feed, which would support revenue over the longer term.

"Bears win this quarter ... but not the war," said Brent Thill, an analyst with Jefferies.