Facebook shareholders sue company after stock plunge 'shocked' market

Facebook shareholders sue company after stock plunge 'shocked' market

The report was a relief to investors in the United States technology sector, still reeling from a profit warning by Facebook Inc Wednesday that plunged its stock 19 percent. "The reality was Facebook was going to hit a growth wall in new users at some point, but I don't think anyone thought it would happen so soon", he wrote in a blog post.

The big picture: After missing predicted targets in their most recent quarterly reports, both Facebook and Netflix saw shares tumble.

Facebook's fortunes shifted in under two hours as the company first reported revenue and user growth that missed expectations and then issued warnings about future growth and expenses.

Facebook's margin fell to 44 percent in the second quarter from 47 percent a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy. The company's sales grew at a 42% clip in the second quarter, so the forecast implies that its growth rate for the rest of the year will be 35% or less.

Facebook said it doesn't expect to see revenue growth for a while, according to CNBC. All told, the US$119 billion of its value that was wiped out is worth almost as much as McDonald's. "Instagram has over 1 billion users, and all Facebook apps (Facebook, WhatsApp, Messenger, and Instagram) have 2.5 billion unique monthly users".

Other companies have, in the past, experienced similar plummets on the stock exchange, if not quite as severe as Facebook, who are now battling new data laws and public concern over their privacy policies.

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The huge fall came after Facebook published its earnings report for the second quarter of 2018, which revealed the company is growing at a slower rate than predicted.

A total of $128 billion was wiped off Facebook's value in just two hours following the second quarter briefing, the first since the Cambridge Analytica scandal and new European Union data rules came into effect. Earlier Wednesday, its stock hit a new all-time high of more than $218 a share.

More lucrative than sales of goods that Amazon owns, third-party transactions offer the company a commission that increases significantly when merchants choose to hand over fulfilment and advertising to Amazon, as many do.

Investors were also concerned by figures which showed the number of active users has also grown less quickly than expected.

'The real concern is the revenue trajectory, ' one investor told the Financial Times when asked about Facebook's share price.

New options Facebook is offering users to opt out of certain data collection - inspired in part by a new privacy law in Europe - could lead to less advertising revenue. Facebook's market cap was $629 billion at market close Wednesday, and ended the day Thursday at around $510 billion.

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