Collapse of the Facebook share by almost 20 percent
Author: Osman Cetinkaya
Criticism of the management
The quarterly figures of Facebook were published recently, afterwards the Facebook stock crashed. The price decline was one of the biggest losses in one day and equals an arithmetical total value of companies like McDonald’s or Nike. At the close of trading on the New York Stock Exchange, the share fell by around 19 percent.
Investors take this lightly. Facebook is still a money machine according to analyst Mark Mahaney. “There is the Facebook Messenger and WhatsApp. These are two services with more than two billion users in each case. And both have not yet been monetized” Mahaney told CNBC.
Number of users is below expectations
Reason for the significant fall of the share is in particular the low user growth. In Europe, the number of users has decreased by one million, now there are 376 million users who are active at least once a month. The daily recurring users have declined from 282 to 279 million. Although the total number of Facebook members has grown, the number still was far away from expectations. Investor Ed Keon says that many investors took the growth on Facebook for granted. However, Facebook is not a sure-fire success, as many assumed.
The employees on Facebook are also affected by the stock crash, as most of the 30,000 employees have share packages which they can sell only after a certain time. Accordingly, the shock would have been big in the headquarters of Facebook in Silicon Valley. CEO Mark Zuckerberg lost about 16 billion dollars of his assets.
Faults of the management are to blame
Critics attribute this to the mistakes of the management. “Management failures, election manipulation, fake news, hate speech and sexual harassment, as well as glorification of violence delivered via Facebook – all of these things could have been tackled much earlier and proactively” said analyst Natasha Lamp on the tech show from Bloomberg TV.
Roger McNamee, one of the first investors on Facebook, also criticized the social network sharply. He sees the scandals in recent months as the cause of the drop. He also thinks that Facebook is slowly losing users in the markets that are most profitable. These include Europe and the USA. In the United States, Facebook generated around $ 25 per user in the past quarter, and $ 8.60 in Europe. In addition to the saturation of the market, Facebook has to invest a lot in privacy and security, and thus has to hire thousands of new employees.
Loyalty is questioned
McNamee estimates that Zuckerberg will face long-term problems with employees: “Employee loyalty will decrease. Their willingness to simply ignore certain things will diminish – such as the ethnic cleansing in Myanmar, the involvement in the elections of the US or Brexit. All this has been easy for the employees so far, because the share price took off like a rocket.”