Social media company loses $120 billion in market value in a biggest one-day wipeout in the US stock market history.

Facebook had 2.23 billion monthly users as of June 30, up 11 percent from a year earlier, but well short of what industry analysts had been expecting.
Facebook had 2.23 billion monthly users as of June 30, up 11 percent from a year earlier, but well short of what industry analysts had been expecting. (Reuters Archive)

Facebook Inc Chief Executive Mark Zuckerberg's fortune took a more than $15 billion hit on Thursday, as the social media company suffered the biggest one-day wipeout in US stock market history a day after executives forecast years of lower profit margins.

Shares closed down almost 19 percent at $176.26, wiping more than $120 billion off the company's value or nearly four times the entire market capitalisation of Twitter Inc.

At least 16 brokerages cut their price targets on Facebook after Chief Financial Officer David Wehner startled an otherwise routine call with analysts by saying the company faced a multi-year squeeze on its business margins.

That "bombshell," as one analyst termed it, played into concerns on Wall Street that Facebook's model could be under threat after a year dominated by efforts to head off concerns over privacy and its role in global news flow.

Facebook's worst trading day

It was the company's worst trading day since going public in 2012, and among the biggest one-day losses of market value in US stock market history.

The loss came a day after Facebook revealed that its user base and revenue grew more slowly than expected in the second quarter as it grappled with privacy issues.

Those revelations stunned investors, who believed the company had weathered the recent scandal over users' privacy and pushed the stock to an all-time high on Wednesday of $217.50.

"There definitely is a concern that the Cambridge Analytica scandal kind of raised this idea that the way that Facebook treats us and out data may not be the way we want to be treated," said Ian Sherr, executive editor, CNET News. 

And a lot of concerns started popping up not just among users but also among politicians and lawmakers around the world that maybe Facebook wasn't taking as seriously this responsibility to take care and steward our information

Ian Sherr, executive editor, CNET News

Loses equal to wealth of 81st-richest person

The more than $15 billion in net worth that Zuckerberg lost on Thursday is roughly equal to the wealth of the world's 81st-richest person, currently Japanese businessman Takemitsu Takizaki, according to Forbes real-time data.

Slowing revenue growth initially pulled the stock down nearly 9 in after-hours trading on Wednesday before losses picked up on the margin outlook.

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 also said revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns, would not be enough to repair the damage.

Facebook had 2.23 billion monthly users as of June 30, up 11 percent from a year earlier, but well short of what industry analysts had been expecting.

Source: TRTWorld and agencies