Shares in the social media giant Facebook fell in excess of 13 per cent recently, closing at less than $160 after the company faced questions from law enforcers in the US and UK regarding its handling of personal user data.
Reports last weekend alleged a huge leak of personal information pertaining to over 50 million users, setting in motion a week-long tumble in stock prices – the worst since July 2012 – two months after the stock initially went public.
Facebook’s Chief Operating Officer, Sheryl Sandberg, dismissed the potential for long-term damage to the company, claiming that Facebook does not consider matters of user privacy as a long-term problem in terms of its business model or stock value.
Despite these claims, Facebook is estimated to have lost approximately $75 billion in market capital in the past week alone.
5-Min Live Chart [FB]
The company now faces a tough period ahead, as lawmakers from both sides of the Atlantic are keen to probe allegations made by two UK and US-based newspapers that a firm, Cambridge Analytica, improperly accessed the data of millions of users, with a view to selling it on to influence election outcomes or improperly target users via advertising without their consent.
The stock dropped almost 7 per cent in the immediate aftermath of the reports, before falling a further 2.5 per cent on Tuesday after news broke that the FTC were compelled to investigate the role Facebook played in the data leak.
Despite this, Facebook witnessed a single day gain by Wednesday, with shares closing up slightly less than 1 per cent, following a press conference where CEO and Facebook founder Mark Zuckerberg apologised for the incident.
The following day, however, saw analysts downgrading Facebook stock after a #DeleteFacebook movement began to gain momentum.
The highest executives of the company responded receptively to calls for official testimony, and several major advertisers spoke out in defence of the social media giant, although this did little to stop shares falling a further 3 per cent – ultimately culminating in the worst performing week for the company in almost six years. Analysts are forecasting further falls in the near future, particularly as the investigation by the UK Information Commissioner’s Office gains traction.
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