Longtime investor abandons Mark Zuckerberg as Meta continues record-breaking tumble
Wednesday - 09/02/2022 09:17
After recording the most catastrophic day in stock market history, the “extreme” stress on the billionaire’s fortune is only just beginning.
Facebook and Meta CEO Mark Zuckerberg’s horrific start to 2022 has continued well into February, with the billionaire’s social media ventures faltering again on the stock market after last week’s cataclysmic $200 billion ($A280 billion) single-day crash.
The social media giant is now worth less than $US600 billion ($A843 billion), placing it firmly behind US computer company Nvidia in terms of market cap for the first time in the pair’s rivalry.
The company, which has previously scraped past $US1 trillion ($A1.4 trillion) in market cap, generated more than $US117 billion ($A163 billion) in revenue in 2021. However, first-quarter forecast that badly missed estimates has sent its stock into freefall, dropping an incredible 26 per cent the following day.
The dip represented the largest 24-hour crash in the stock market’s history and now even long-time advocates of Zuckerberg are abandoning ship.
Billionaire hedge funder Peter Thiel this week announced he would be stepping down from Facebook’s board after almost 20 years supporting the enterprise.
Thiel, who made it big in the financial world through big fish investments including PayPal, Airbnb and Palantir Technologies, has endured a string of controversies following his public endorsement of Donald Trump.
His initial $US500,000 ($A697,000) investment into the Harvard dorm-room enterprise in 2004 marked the biggest outside investment for Facebook at the time, when the website was still finding its feet among US university students.
Thiel has run into problems at Facebook for his involvement in rival start-ups, including Clearview AI, which uses data from internet profiles to create a facial recognition tool that can be used by law enforcement. Thiel was told to stop using Facebook’s data in 2019.
His exit followed a separate scandal for the social media conglomerate, which saw Zuckerberg at loggerheads with European officials over “evolving” privacy regulations.
Meta currently relies on Standard Contractual Clauses to transfer data, which the company cautioned could be subject to “regulatory and judicial scrutiny”.
“If we are unable to transfer data between and among countries and regions in which we operate, or if we are restricted from sharing data among our products and services, it could affect our ability to provide our services,” a Meta statement read.
"If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs or rely upon other alternative means of data transfers from Europe to the United States, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.”
If Meta pulls through with its bluff, virtually an entire continent could be left without access to Facebook or Instagram.
However, the controversial new technology’s rocky start has left a lot to be desired for investors, with some critics believing the company is on too much of a slippery slope to be making demands from entire continents.
Since 2019, Meta’s Reality Labs has lost a hair under $A30 billion from just $A5.5 billion in profits.
Meta says new laws and regulations could lead to “unfavourable outcomes” for the product, adversely affect the development of new products, lead to “negative publicity and reputational harm” and force the company to modify or cease its existing business practices.
Despite early speculation, Facebook has continued to invest heavily in its futuristic “metaverse” project, but for now, the company is still reliant on advertising revenue for nearly all its income.
The online world seeks to create an entirely digital space for users to exist in and aims to capitalise on cutting edge developments including NFTs and digital real estate to turn what was once scrolling on your phone into a completely immersive 3D experience.
Early adopters and advocates of “non-fungible” technology have backed the future success of digital worlds, but the recent tumble for Meta has left several investors sceptical of its immediate appeal.
Some, including CIO at Bokeh Capital Partners Kim Forrest, believe the company is on “life support”.
“The reaction to Facebook was pretty extreme, but it’s pretty hard to argue with it,” chief investment officer of Jacob Asset Management Ryan Jacob said via The Independent. “Investors should be cautious given the challenges they have.”
Meta has dropped down to number eight on the S&P 500 after stock prices dipped another 5.1 per cent at the close of the latest day of trading.