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Facebook Shares Crash Sets All-Time Stock Market Record

  • Meta, formally known as Facebook, lost more than $220 billion in market capitalization in a single day.
  • Meta’s losses totaled more than the previous record set by Apple, which also suffered a mega loss of $182 billion in a single day in September 2020.
  • After reporting on Wednesday that its first-quarter earnings would be lower than expected, Meta’s value on the stock market sharply fell.

Meta, the parent company of Facebook, suffered a huge loss on Thursday after reporting that it expects lower-than-expected first-quarter results. The company suffered a loss of more than $220 billion and its stock fell to $237 in market value during trading on Thursday.

This is the largest drop in recorded history for a company in the U.S. stock market. With this, Meta’s losses surpassed the record previously held by Apple, which in September 2020 registered a loss of $182,000 million when the value of its shares plummeted.

Meta shares by fell approximately 26% during trade on Thursday, CNBC reported, reducing the company’s market capitalization to about $660 billion as the company’s reported earnings for the fourth quarter fell short of expectations.

The reported earnings were finalized at $3.67, compared to the $3.84 expected, Refinitiv said. However, revenue for the quarter was positive as it generated $33.67 billion, outperforming the $33.4 billion it had estimated.

The Facebook parent’s revenue forecast of $27 billion to $29 billion for the first quarter of the year did however fall short of what analysts had forecast at $30.15 billion, Refinitiv noted.

The Second Major Drop of Facebook

This is the second crash to have hit Facebook in the last three years. In 2018, it lost $119 billion in market value for similar reasons as the company had announced that it expected revenues to fall short of analyst forecasts.

The company has also been suffering from serious public image problems after being accused of allegedly favoring the Democratic candidate in the most recent presidential election.

Then, during a hearing before the US Senate in early October of 2021, former employee Frances Haugen accused Facebook of harming children, fueling division in the world and undermining American democracy by failing to filter certain content.

Since 2020 there have been notable drops in the stock market that included million dollar losses for other technology companies such as Apple, Tesla, Microsoft, and Amazon. Paradoxically, these companies later managed to recover, to the point that, today, Apple is the company with the largest market capitalization in the world.

Betting on the Metaverse

The fall of Meta in the U.S. stock market coincides with the change in strategy outlined by the company as it explores new forms of business to supplement its core services of Facebook, Instagram and WhatsApp.

Chief Executive, Mark Zuckerberg has taken what many consider to be an audacious bet, turning Meta toward the metaverse, a virtual world that promises vast growth potential, but has yet to be built.

The company is seemingly betting its entire future on these virtual spaces that have both believers and detractors. For example, the real estate business in the metaverse is considered by some critics to be a new form of Ponzi scheme, while others see it as the future.

Zuckerberg stated on Wednesday 2nd that the company’s investment in the metaverse led to a net loss of approximately $10 billion last year.

On the Flipside

  • Zuckerberg outlined that the company’s drop in revenue was a consequence of privacy measures taken by Apple’s iOS, and macroeconomic challenges affecting the budgets of advertisers.

Why You Should Care

  • Facebook’s crash on Thursday 3rd dragged the stock of other prominent social media’s down with it. Snap plunged by a considerable 18%, Pinterest fell 5%, and Twitter shares dropped by just over 4%. 
  • Although Facebook lost around 1 million profiles in 2021, it maintains another 1.929 million active users. Does this represent a sign of exhaustion for a platform that has never stopped growing before?

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