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Facebook’s Meta Faces Its Biggest “Existential Crisis”; Loses $230 Billion Market Value in a Single Day

Meta
Published on Feb 18, 2022

Facebook, now Meta, has emerged as the fourth quarter’s biggest loser. This is not the first time that Meta’s shares have dropped dramatically. Facebook’s stocks plunged 19% in July 2018 due to the slowdown in user growth, translating to a $120 billion decline in market capitalization. During the time, Meta set the record for the largest-ever loss of value in one day for a U.S. traded company. 

Well, the trends seem to be continuing. 

Facebook’s owner Meta saw a slump in its stock market value by more than $230bn on Thursday, a record single-day loss for a US firm. Its shares fell by 26.4%. 

This marked the company’s worst single-day loss since its Wall Street debut in 2012. 

26.4% stock plunge

When the news of Meta’s stock plummeting broke on Thursday, Facebook’s chief executive Mark Zuckerberg felt the ripples. The slump has sent Mark Zuckerberg’s net worth tumbling by nearly $29 bn, as issued by the Bloomberg Billionaires Index. This drop in Mr. Zuckerberg’s wealth is estimated to be equivalent to the annual gross domestic product (GDP) of Estonia. Even with this drop, Mr. Zuckerberg still holds an estimated net worth of almost $90bn, thus maintaining this ranking as one of the richest people in the world. 

The biggest single-day plummet in history in the stock price of Facebook’s parent company Meta has erased more than $230bn in its market value, easily making it a historic one-day loss in history for a US company. 

Meta’s 26.4% wipe-out comes amid the apprehensions about its future. 

Meta

Read More: “The Ultimate Dream of Social Technology”: What Is the Metaverse and Everything You Need to Know. 

Facebook rebranded itself as Meta last year as part of its strategic pivot to evolving as a virtual-reality-based corporation. The company’s advertising model has also suffered a hard plunge owing to the privacy changes at Apple. Facebook said it expects this will cost them billions. 

The stock market slump came on the eve of Facebook’s 18th founding anniversary. Meta issued a statement saying that Facebook’s daily active users (DAUs) had dropped for the first time in its 18-year history. It is the first time that this measure of activity has gone into reversal on the world’s biggest social network. 

Shares of Facebook’s parent Meta closed down more than 26% on Thursday after the company forecasted weaker-than-expected revenue growth. It also stated that it’s taking a big hit due to Apple’s privacy changes, resulting in the first quarterly decline in daily active users on record. 

Facebook’s remark on the impact introduced by Apple’s new App Tracking Transparency feature is the most concrete data point so far. The transparency feature will reduce Facebook’s targeting capabilities by limiting advertisers from accessing an iPhone user identifier. 

You may also read: Social Media Trends to Watch Out For in 2022

Disappointment over Meta's stock fall

Why did the Meta stock crash? 

Meta is encountering a whirlwind of distinct problems. 

Formerly known as Facebook, Meta stated in its fourth-quarter earnings call that Facebook’s active user base shrank for the first time in its 18-year journey since inception.  

With Apple bringing in its App Tracking Transparency policy, which lets people determine whether or not they want to be tracked by companies like Meta, which can then sell that data to advertisers, Facebook started facing major problems. This led to its quarterly advertising-income falling.

The daily Facebook users fell by about half a million in the last three months of 2021. The loss was greatest in Africa, Latin America, and India, indicating that Facebook’s ability to add users globally has now peaked. Meta’s rival TikTok is likewise drawing in a younger audience, giving rise to its stagnated user growth around the world. These are bigger, longer-term issues. 

Facebook’s parent company, Meta’s meteoric plunge of 26.4 percent, yanked other tech stocks down along with it. The sheer extent of Facebook’s market cap collapse demonstrates how tech companies have ballooned in size to become behemoths with unparalleled market power and the drama that can transpire when they stumble. This decline has resulted in erasing $230 billion from the company’s valuation in a single day, making it the biggest one-day loss for any US company. 

Stock market

The Meta Facebook stocks finished with its biggest single-day drop ever, after the 19% plummet it saw in July 2018. Thursday’s crash shaved more than $230 billion from Facebook’s market cap. While the stock will certainly bounce back in the coming days, given the volatility gripping the technology sector, Analysts are pointing at the stiff competition that Meta will now face from its rivals. 

The BIG NUMBER Drop

$31 billion! 

Yes, you heard it right. 

That’s how much Facebook’s co-founder Mark Zuckerberg’s net worth plunged by. His current net worth is now estimated at $85.9 billion, dropping below the $100 billion mark for the first time since last year. This one-day wealth loss of $31 billion is said to be ranked as the second-biggest ever caused by a share-price decline. 

On the Contrary

Meta’s one-day crash now ranks as the biggest wipe-out in market value in the stock-market history. With Meta’s plunge at the beginning of 2022 being “disappointing,” the company is likely to ramp up its foray into the metaverse, making it a significant year for them. While certain factors like increased competition from TikTok, challenges arising due to Apple’s iOS advertising changes, and giant investments in the metaverse will impact the earnings, Facebook quoted, it is likely to bounce back in the second half of 2022. 

Meta's disappointing fourth quarter results

Making matters worse 

With the business on Meta’s core platform slowing and the competition from platforms like TikTok increasing, Facebook has reported experiencing a decline in its daily users. Meta has also reported a rare decline due to a sharp growth in expenses with the investment in the “metaverse.” 

What’s more! 

With Zuckerberg shifting more of the company’s resources into building out his vision of the metaverse, the company indicated that the upcoming year was potentially going to be worse. Facebook spent a total of over $10 billion last year, expecting a “meaningful increase” for the year 2022. But with these actions, the company painted itself into a corner. On the impressive side, Facebook still estimates to expect continued headwinds due to the shift of engagement within the apps towards video, as the competition for people’s time is increasing. 

The Aftermath 

All eyes will now be on what plays out in the forthcoming day for the parent company of Facebook, Instagram, and WhatsApp. While the blame for Meta’s plunge is on its fourth-quarter financial results, one of the core issues is the reducing traction on their social platforms. With people spending less time on Meta’s platforms, moving forward, the revenue growth is likely to get hit. These factors have helped destroy billions of dollars in market value and resulted in knock-on effects for other stocks in the social media space

Facebook's Meta crash infographics

Over the years, Facebook, or Meta, as you want to call it, has broken plenty of records. While in 2012, the company became the first social network to reach 1 billion users, in 2008, the founder, Mark Zuckerberg, became the world’s youngest self-made billionaire at the age of 23. With the recent Facebook stock crash, the company gets to add another record to its profile.

On Thursday, the company’s stock plunged more than 24%, erasing roughly $200 billion from Facebook’s market cap. This is also being termed as the biggest loss of market value in a single day for a U.S. company.  

The only choice there is now to see how it plays out and how Meta strikes back from the losses. 

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