Facebook has suffered the biggest one-day wipeout in US stock market history as CEO Mark Zuckerberg’s fortune stands to take an $US16 billion ($21 billion) hit after forecasts of years of lower profit margins.
Facebook’s shares tumbled 19.6 per cent on Thursday to close at $US176.26, wiping $US119 billion ($161 billion) off the company’s market value.
In essence, Facebook’s decline value is roughly the entire market value of McDonald’s or Nike, give or take a few billion, the AP reports.
The social media giant, which also owns Instagram and WhatsApp, was the biggest drag on the Nasdaq and the benchmark S&P 500 index, also leading the losses in the technology sector that fell 1.9 per cent.
Facebook’s bleak forecast comes after it said profit margins would plummet for many years due to the costs of improving privacy safeguards and slowing usage in its biggest advertising markets.
It’s the largest loss of market value in one day since Intel shed $US90.74 billion ($122 billion) in 2000.
Mr Zuckerberg dropped from the third richest person in the world to the fifth as a result of the plummet.
Facebook announced on Thursday it will boost its spending by 50 per cent to improve how it monitors content, tracks advertisers and it handles user data – which has resulted in significant backlash and regulator scrutiny towards the company.
Facebook reported it had 2.23 billion monthly users as of June 30, up 11 percent from a year earlier, but was well short of expectation.
The company still has a total market value close to $US510 billion ($691 billion), which exceeds the annual gross domestic product of countries like Poland, Belgium and Iran.
The firm said its margins would shrink to the mid-30 per cent rage, down from 44 per cent in the most recent quarter.
The warnings also dragged on the other components in the high-growth FAANG group. Netflix declined 1.3 per cent, Alphabet dropped 0.8 per cent. Amazon.com fell 2.8 per cent, while shares of Apple were flat.
In early Friday trading (5.30am AEST), the Dow Jones Industrial Average was up 117.03 points, or 0.46 per cent, at 25,531.13, the S&P 500 was down 9.13 points, or 0.32 per cent, at 2836.94 and the Nasdaq Composite was down 86.53 points, or 1.09 per cent, at 7845.91.
The estimate for profit growth of S&P companies in the second quarter is now at 22.4 per cent, compared with the 20.7 per cent estimate as of July 1, according to Reuters.
Seven of the 11 main S&P sectors were higher, with the consumer staples sector up 1.32 per cent.
Mondelez’s rose five per cent after posting a better-than-expected profit and was the biggest boost to the sector.
Hershey gained 5.9 per cent after topping quarterly sales and profit estimates.
Supervalu surged 64.7 per cent after United Natural Foods agreed to buy the supermarket operator in a deal valued at about $US2.9 billion ($3.9 billion). United Natural slipped 13.6 per cent.
Ford fell 4.2 per cent after the automaker lowered its full-year profit forecast due to slumping sales and trade tariffs in China and its struggling business in Europe.
McDonald’s dipped one per cent after the fast-food chain missed US same-store sales estimates for the first time in at least two years. Chipmakers were a bright spot.
Advanced Micro Devices jumped 5.9 per cent, while Xilinx rose 11.2 per cent after the companies topped quarterly estimates.
Qualcomm gained 4.8 per cent, while NXP Semiconductors fell 5.6 per cent. Qualcomm ended its pursuit of NXP after failing to win Chinese regulatory approval.
Advancing issues outnumbered decliners by a 1.48-to-1 ratio on the NYSE and by a 1.04-to-1 ratio on the Nasdaq.
The S&P index recorded 43 new 52-week highs and four new lows, while the Nasdaq recorded 61 new highs and 33 new lows.