Facebook loses a whopping $150 billion in just two hours; share price tumbles 24%
Facebook had cautioned investors to expect a big jump in costs because of efforts to address concerns about poor handling of users' privacy and to better monitor what users post. Total expenses in the second quarter surged to $7.4 billion, up 50 per cent compared with a year ago.
Facebook share price plunged 24 per cent on Wednesday after the social media network's revenue and user growth fell short of investor expectations. Concerns about the impact of privacy issues on the social media company's business, with executives warning that revenue growth would slow and expenses would rise, led the steep fall in the stock.
The sharp plunge in the stock price wiped out about $150 billion in market capitalisation in under two hours.
The company had cautioned investors to expect a big jump in costs because of efforts to address concerns about poor handling of users' privacy and to better monitor what users post. Total expenses in the second quarter surged to $7.4 billion, up 50 per cent compared with a year ago.
"Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4," said Chief Financial Officer David Wehner.
Expenses are expected to grow 50 percent to 60 percent compared with last year as the company invests in security, marketing and content acquisition, he said.
The firm, which is facing backlash for its handling of fake news and privacy, said it had 2.23 billion monthly active users at the end of June. This was up 11 per cent on June 2017, the slowest growth in more than two years.
Facebook also plans to spend billions to improve the way it monitors content, tracks advertisers and treats user data - areas where it has faced regulator scrutiny.
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The firm, which owns Instagram and WhatsApp, is also investing in new features, such as virtual reality and video.
Daniel Ives, chief strategy officer at GBH Insights, said the firm`s forecast was "nightmareish".
"They gave a very disappointing outlook for the second half of the year and 2019 and that`s going to significantly weigh on the stock in the near term," he said.
(With inputs from agencies)