Shares of Facebook owner Meta plunged 26 percent on Thursday, perhaps the greatest single-day market value wipeout for a US corporation, as the social network giant published a bleak prediction, citing Apple’s privacy reforms and greater competition.
The massive loss, which erased more than $200 billion from Meta’s market capitalization, impacted the entire technology industry and pulled the Nasdaq Composite Index down. If the losses continue, it will be the company’s greatest one-day loss since its first public offering on Wall Street in 2012.
“While Meta CEO Mark Zuckerberg may be eager to seduce the world into an other reality, dismal fourth-quarter performance popped his metaverse bubble,” said Laura Hoy, an equity analyst at Hargreaves Lansdown. Investors expect policy tightening at the Federal Reserve to erode the industry’s lofty valuations after years of ultra-low interest rates, putting pressure on big US tech-focused corporations this year. The Nasdaq, which is dominated by technology and growth firms, plunged more than 9% last month, its largest monthly decline since the March 2020 market meltdown caused by a coronavirus.
“Markets were caught off guard by Meta’s and other firms’ downgrades in profit forecasts,” said Kenneth Broux, a strategist at Societe Generale in London. “The tech selloff spread to wider equities markets this morning, and with the Fed prepared to hike interest rates, we might see more volatility in the future,” he warned.
The stock’s collapse was a win for investors who expected the company’s shares to fall. According to S3, short sellers in Meta were prepared to extend their potential winnings to more than $2 billion as a result of Thursday’s drop. With the values of Big Tech corporations like Apple and Microsoft skyrocketing in recent years, they have also grown more vulnerable to investor whiplash, resulting in losses totaling tens of billions of dollars in a single trading day.
On September 3, 2020, Apple lost roughly $180 billion, while Microsoft lost $177 billion on March 16, 2020. However, if losses continue, Meta’s big selloff will outperform them. For the first time, Meta recorded a decrease in daily active users from the previous quarter, as rivalry with rivals such as TikTok, the video sharing platform controlled by China’s ByteDance, heats up.
According to Meta, around 3% of global monthly active users in the fourth quarter were merely breaching accounts, while duplicate accounts may have accounted for approximately 11% of use. The dissatisfaction with Meta’s results and consequent price drop brought back memories of the bursting of the tech boom in 2000.
Following the sector’s recent record-breaking run, investors appear to be getting more choosy. According to research company Vanda, individual investors’ acquisitions in late 2020 and early 2021 were centred on pricey technology, EVs, and so-called “meme” companies. Large-cap tech acquisitions have soared in the last week, while speculative assets have experienced relatively little interest. Towards the same time, numerous hedge funds, including Wellington Management Group, Sanders Capital, and Tiger Global Management, declared stakes in Meta Platforms at the end of September, and might have been harmed by the share wipeout.
The so-called FAANG group, which includes Facebook, Amazon, Apple, Netflix, and Google’s Alphabet, has had about $400 billion in market capitalization wiped out in the first few weeks of this year as cheaper areas of the market become more appealing as central banks reduce stimulus. Twitter, Pinterest, and Spotify were among the other social media companies that took a beating on Thursday. Spotify has been plagued by a controversy concerning Covid vaccine disinformation, as well as unsatisfactory outcomes.