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Why Facebook Lost $50 Billion in Market Cap in March 2018

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Facebook’s market cap erosion

Earlier in this series, we discussed the reasons that led to a fall in the markets. Facebook (FB) stock fell following the Cambridge Analytica data privacy breach, which had a contagious effect on tech stocks such as Google and social media stocks such as Twitter.

The Cambridge Analytica data breach first came to light on March 17, 2018. It was disclosed that the firm collected the data of about 50.0 million users without their permission, potentially helping Trump win the presidential election. This breach sent Facebook’s market value down significantly.

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Since March 17, 2018, Facebook stock has dropped more than 15.0% and has lost almost $50.0 billion in market capitalization, as the chart above shows. Mark Zuckerberg, Facebook’s CEO, noted, “I’m responsible for what happens on our platform.” He outlined the steps that the company plans to take to prevent further breaches and abuses.

Other factors that pressured Facebook stock

Fundamentally, Facebook is doing well. On January 31, 2018, Facebook announced its 4Q17 results. The social media giant reported revenues of ~$13.0 billion and earnings per share of $2.21, which exceeded analysts’ estimates of ~$12.6 billion and $1.95, respectively. 

However, recent events at the company have concerned investors. Facebook was in the spotlight in February 2018 when special counsel Robert Mueller alleged that the fake Russian accounts supporting Donald Trump had influenced the social media giant’s news feed content.

In early January 2018, Facebook indicated fewer advertising dollars, as algorithm changes could persuade users to spend less time on Facebook. This trend could translate to fewer ad dollars, which comprise the main source of Facebook’s revenues. In 2016, Facebook announced that its news feed had become saturated with ads, so the company would have to look for new avenues to grow its ad business.

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