Facebook's shares have dropped about 20%
today with the slide starting yesterday evening
and extending into the morning trading.
Now, for a company of that size, that
equates to roughly $123 billion of market value evaporating
in just one day.
That's the biggest one-day loss of any US company in history.
It is roughly the same as the value
of all of McDonald's or even greater
than Goldman Sachs, Nike, or General Electric.
Now, what caused this huge slide?
Well, Facebook reported disappointing earnings
on Wednesday evening.
Facebook has had a good run for a long time,
and its shares actually hit a record
leading up to the earnings.
But on the call and in the numbers,
Facebook revealed that its user growth numbers are
slowing in every major region.
And its revenue per user is also slowing.
Now, it's important to remember that Facebook is still
a very profitable company.
It still has margins that would be
the envy of almost every other company in the world.
But when people had been projecting that this growth
rate would continue almost indefinitely,
this came as a very nasty surprise to investors.
And that's why they panicked yesterday evening
and pushed the shares out dramatically,
and it's extended into the morning.
Analysts and investors say that this is partially
a reflection of just how extended
Facebook's shares had become leading into the earnings.
And they stress that actually Facebook
is still a company that is growing at a healthy clip.
And this is a healthy correction for a company.
However, this is clearly a reminder
that Facebook is still under pressure on many fronts.
Its user growth is slowing.
It's facing more regulatory scrutiny
after the Cambridge Analytica scandal
that erupted in early March.
Until those clouds dissipate, investors
are going to be very wary of dipping back
into the social media giant's stocks.