After Facebook shares plunged by $160 billion in one day, CEO Mark Zuckerberg is no longer the third-richest person in the world.
The tech titan also finds himself in hot waters once again as outraged investors drag the company into another high profile lawsuit. It seems like Facebook’s many scandals have begun to catch up with the company – and its billionaire CEO.
Worst Trading Day in the History
Last month Forbes named Mark Zuckerberg, CEO and founder of Facebook, the third-richest person in the world with a net worth of $81.6 billion. He beat Warren Buffet by a margin of $373 million for a spot on the prestigious list. However, this month is a whole different story.
Only a few days ago Facebook experienced a huge crash on the stock market that drove its value down by 20 per cent; under 24 hours Mark Zuckerberg had lost $17.6 billion in net worth. With the huge decline, the billionaire CEO didn’t only lose his third place on Forbes’ billionaire list to Warren Buffet, he slid down to sixth place in just one day, according to Forbes’ real-time ranking. Now, the next challenge Zuckerberg faces is figuring out how to survive on his remaining $64 billion.
The company’s worst trading day in the history came only a day after it released its disappointing earnings report for the second quarter. According to analysts, the recent drop in share is associated with the company’s many scandals over the past few months which have brought Facebook tons of negative press.
The Cambridge Analytica data breach was the latest and most significant of all scandals where one firm gained unauthorized access to personal information on millions of Facebook users and used it in a covert political campaign in then-candidate Donald Trump’s favor.
As a result the company’s second-quarter growth and revenue projection were rather dismal, showing fewer daily active users in Europe and North America. To make matter worse for investors, David Wehner, Facebook CFO, said that growth and revenue will plummet even further until the end of 2018.
The decrease in Facebook’s value has reduced its share prices from $217.50 to $176.26 which translates into $116 billion loss of market capitalization within a single day. Analyst Ross Sandler from Barclay says that Facebook is now operating on very shaky grounds, and its weakened infrastructure could collapse any moment, causing huge losses to investors.
In almost every public relation disaster his company had to bear, Mark Zuckerberg has taken the unfortunate task of damage control upon himself. When the Cambridge Analytica debacle came to light, he volunteered to testify in front of the U.S. Congress and took full responsibility for the data breach.
The U.K. Parliament also summoned him for questioning in May where he slipped up while giving a statement to Recode. He said that being from a Jewish background he finds it offensive when people deny that the Holocaust ever happened. But if someone wished to share such thoughts and ideas on his platform, he wouldn’t necessarily take them down because people can be wrong about a lot of things. The statement was considered extremely offensive to the Jewish community and the CEO has since issued an apology for his words.
Investor Files Lawsuit Against Facebook
After the share values plummeted, one investor named James Kacouris filed a class-action lawsuit against Mark Zuckerberg for misleading his investors about the company’s performance. According to Kacouris, Facebook had kept its decreasing growth and revenue secret from the stockholders until the day it released its second quarter’s earnings report.
The lawsuit, which was filed in U.S. District Court for the Southern District of New York, also targeted the company’s CFO David Wehner. Facebook defended its disappointing second quarter report by saying that slow user and revenue growth was a result of the social media platform’s improved safety and privacy.
Kacouris said that investors were shocked by Facebook’s earnings reports, and started selling off their shares frantically which caused the stock prices to crash. He said that Facebook’s wrongful actions and decisions have caused the company’s market value to decline, resulting in significant damages to the shareholder community. Facebook has yet to comment on Kacouris’ allegations.