- The company, which changed its name to Meta, lost more than $237 billion in market capitalization in a single day.
- Facebook (NASDAQ:FB) surpassed the previous record set by Apple (NASDAQ:AAPL) 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, Facebook fell on the stock market.
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 $237 billion in market value during the session on Thursday.
This is the largest drop in recorded history for a company in the US stock market. With this, Meta surpasses the record previously held by Apple, which in September 2020 registered a loss of $182,000 million when the value of its shares plummeted.
Facebook shares fell about 26% during trading on Thursday, CNBC reported, reducing the company’s market capitalization to about $660 billion. The company’s reported earnings for the fourth quarter fell short of expectations.
Reported earnings were $3.67 versus $3.84 expected, Refinitiv said. However, revenue for the quarter was positive as it managed to obtain $33.67 billion instead of the $33.4 billion it had estimated.
But its revenue forecast of $27 billion to $29 billion for the first quarter of the year fell short of what analysts had forecast at $30.15 billion, Refinitiv noted.
Second strong fall of Facebook
This is the second crash to hit Facebook in the last three years. In 2018, it lost $119 billion in market value. And it was precisely for a similar reason. The company announced that it expected revenue below analyst forecasts.
The company has also been dragging serious image problems after being accused of favoring Joe Biden’s candidacy and blocking Donald Trump for the benefit of the then Democratic candidate.
Then former employee Frances Haugen accused Facebook of harming children, fueling division in the world and undermining American democracy by failing to filter certain content, during a hearing before the US Senate in early October of 2021.
Since 2020 there have been the biggest falls in the stock market that included millionaire losses from other technology companies such as Apple, Tesla (NASDAQ:TSLA), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN). Paradoxically, these companies later managed to recover, to the point that today Apple is the company with the largest market capitalization in the world.
The bet towards the metaverse
The fall of Facebook – Meta in the US stock market coincides with the change in strategy of the company that is exploring new forms of business in addition to its Facebook, Instagram and WhatsApp platforms.
Chief Executive, Mark Zucherberg has made a bet considered by many as audacious. He is turning his Meta company toward the metaverse, a virtual world that offers vast growth potential, but has yet to be built.
The company is betting its entire future on these virtual spaces that have their apologists and detractors. For example, the real estate business in the metaverse, which is considered by some critics to be a new form of Ponzi scheme. Others instead see it as the future.
Zuckerberg stated Wednesday that the company’s investment in the metaverse generated a net loss of about $10 billion last year.
On the Flipside
- Zuckerberg said the company’s drop in revenue is a consequence of privacy measures taken by Apple’s iOS and macroeconomic challenges that are affecting advertisers’ budgets.
Why You Should Care
- Facebook’s crash on Thursday dragged down other social media stocks on the stock market. Snap (NYSE:SNAP) fell 18%, Pinterest (NYSE:PINS) fell 5%, and Twitter (NYSE:TWTR) shares plunged just over 4%.
- Although Facebook lost around 1 million profiles in 2021, it still has another 1.929 million active users. Does this represent a sign of exhaustion of the platform that has never stopped growing before?
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