Facebook Crashed More Than 25% in the Worst Slump in the History of the Stock Market

Sophie Webster, Tech Times 04 February 2022, 01:02 am

Facebook has crashed more than 25% in the worst one-day slump in the history of the stock market. Meta, Facebook's parent company, reported disappointing results on Feb.3, showing that it had failed to grow for the first time ever.

Facebook Suffers Stock Market Crash

The decline has hit its CEO Mark Zuckerberg personally, as his own holdings lost tens of billions in value overnight.

Worries about the negative results led its price to drop more than 25% when trading opened on the morning of Feb. 3, wiping $200 billion from the value of the company in hours.

The previous decline in the stock market was seen by Apple back in 2020, when the tech giant lost $180 billion from its market value, according to Bloomberg.

All of the past five biggest swings have been seen in tech companies, in part because of their massive size: Amazon, Tesla, Microsoft have all experienced similar shocks.

Also Read: How to Remove Friends/Followers on TikTok, Facebook, Instagram Without Blocking

Meta's previous biggest drop happened in summer 2018 when it was still called Facebook and lost $121 billion from its value in just one day.

Tech stocks had faced headwinds this year, as investors expect policy tightening at the US Federal Reserve to erode the tech industry's rich valuations after years of ultra-low interest rates.

The tech-dominated Nasdaq fell more than 8% in January, which is its worst monthly drop since 2019.

Meta reported a decline in daily active users from the past three months for the first time as competition with rivals like TikTok, a video sharing owned by China's ByteDance, heats up.

Meta stated that 3% of worldwide monthly active users in the 4th quarter consisted of violating accounts, while duplicate accounts may have represented about 11% of usage.

The disappointment over Meta's earnings and the stock fall raised memories of the bursting tech bubble in 2000. Investors seem to be becoming highly selective after the sector's record-breaking run in the past few months.

According to USA Today, purchases from retail investors in late 2020 and early 2021 were focused on expensive tech, EVs, and so-called meme stocks. In the past week, purchases of large-cap tech have skyrocketed while speculative assets have seen little demand.

The so-called FAANG group of Amazon, Apple, Facebook, Netflix, and Google's Alphabet has seen $400 billion in market capitalization wiped off in the opening weeks of 2022 as cheaper segments of the markets become more attractive while central banks taper stimulus.

Other social media stocks were also affected in the pre-market trading, including Pinterest, Twitter, and Spotify. Spotify has been beset by a row over COVID vaccination misinformation and also released underwhelming results.

Facebook vs. TikTok

One of the contributing factors to Facebook's disappointing results is the popularity of its rival, TikTok. According to Business Standard, TikTok has overtaken Facebook as the most downloaded social media app in the world.

A global survey of downloads in 2020 showed TikTok on top of the list of social media providers for the first time since the study was first conducted back in 2018.

Since its introduction in 2017, TikTok has overtaken Facebook, Instagram and Snapchat, and its popularity sore during the peak of the pandemic in 2020 when people were forced to stay at home for months.