Even through Facebook claims that the social media platform has been hijacked by bad actors and that it is taking measures to mitigate the threat, the investors are not taking those assurances at face value.
Compared to the high that it had hit in July, Thursday’s stock price of the company was 30 per cent lower at $150.13. The company has recently been hit by a series of allegations and scandals related to privacy breaches, fake news and hit by a hard selloff in the broader tech market.
The current stock price of Facebook is near the lowest point that it had touched after the revelation of the data breach scandal surrounding the Cambridge Analytica issue in March this year which had triggered a number of governments and regulators across the world taking note of the issue and pulling up Facebook for its inability of safeguard user data.
But the Cambridge Analytica issue is yet to leave the back of Facebook even after many hours of testimony, a number of executive interviews and multiple changes to its privacy settings. And now, after revelation of another security breach that possibly resulted in data breach of almost 50 million users, there are chances of further regulatory measures on security being faced by the largest social media platform of the world. .
There would be greater potential damage to Facebook’s core business if there is a continuation of the negative reactions surrounding privacy issues as well as the rising concerns about the platform being used for election meddling.
“For the first time, we’ve heard some grumblings from the advertiser community that the hot water that Facebook is in politically is creating some hesitation on budget allocations (for some),” Ross Sandler, an analyst with Barclays, wrote in an investor note this week.
There was a similar user trust issues over privacy concerns, which have been tormenting the company throughout the current year, in the launch of the much awaited video calling device called Portal from Facebook this week – marking its entry into hardware.
The Wall Street has been rattled despite the pledged measures by Facebook. The company saw it getting hit by the largest wipeout in the history of the stock market in July, following the revelation by Facebook’s executives to the investors that its ad sales machinery could get slower following the measures of maintaining stricter privacy by the company.
And the company’s fortunes have been ,made uncertain by its big bet across its products on Stories which is a visual format that was once popularized by Snapchat but one that failed to get in advertisers for the company.
“The question is will this monetize at the same rate as News Feed,” Sheryl Sandberg, Facebook’s COO, said on a conference call with analysts in July. “And we honestly don’t know.”
According to Sandler, there is need of a “positive cataylst” for Facebook to begin its recovery. That can be triggered by reporting of strong earnings later this month. Sandler however thinks that it would not be until early next year that the company’s stocks would stay at their current position.
(Adapted from Money.CNN.com)