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Zuckerberg loses US$16b in record Facebook fall
[NEW YORK] Facebook Inc Chief Executive Officer Mark Zuckerberg's fortune took an almost US$16 billion hit on Thursday, as the social media giant headed for the biggest one-day wipeout in US stock market history, a day after executives forecast years of lower profit margins.
At least 16 brokerages cut their price targets on Facebook after managers said the cost of improving privacy safeguards, as well as slowing usage in the biggest advertising markets, would hit the company's profit margins for more than two years.
Facebook shares were down as much as 19.6 per cent at US$174.78 in early trading, a decline that would wipe about US$124 billion off the company's value - or nearly four times the entire market capitalization of Twitter Inc.
Facebook's second-quarter results were the first sign that a new European privacy law and a string of privacy scandals involving Cambridge Analytica and other app developers are hitting the company's business.
Facebook also warned that the toll would not be offset by revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns.
Describing the announcements as "bombshells", Baird analysts said the issues were to a large degree "self-inflicted" as Facebook sacrifices its core app monetization to drive usage.
Of 47 analysts covering Facebook, 43 rate the stock as "buy", two rate it "hold" and two rate it "sell". Their median target price is US$219.30.
MoffettNathanson analysts called the company's forecast "either the new economic reality of their business model or a very public act of self-immolation to stave off further regulatory pressure".
The US$15.8 billion in net worth that Zuckerberg stands to lose in the move is equal to the wealth of the world's 81st-richest person, currently Japanese businessman Takemitsu Takizaki, according to Forbes real time data.
Some analysts said Facebook's issues would not be easily resolved.
"Unlike Netflix, whose quarterly shortfall we saw as temporary, here we see an evolution of the story, albeit a portion of which we expected," said Daniel Salmon, analyst at BMO Capital Markets.
Others, however, saw a silver lining in Facebook's emphasis on more engaging content and its promotion of stories on its News Feed, which would support revenue over the longer term.
"Bears win this quarter ... but not the war," said Brent Thill, an analyst with Jefferies.