Meta, the parent company of Facebook (NASDAQ: FB) and Whatsapp, had the biggest single-day fall in value for a company in the U.S on Wednesday. After announcing a dismal forecast, it shed 26% of its value. Meta blamed Apple Inc’s (NASDAQ: AAPL) new privacy policies and increased competition from rivals.
Meta’s woes were not borne alone. The considerable drop affected other tech companies and made the Nasdaq Composite Index, a tech-heavy index, fall. The result was that Meta lost $200 billion of its market capitalization while the CEO, Mark Zuckerberg, had $20 billion of his net worth burned. This was the biggest loss in market value for a U.S company on record.
A Plunge That Set New Records
Meta’s fall in share value marks its most significant since it debuted on Wall Street in 2012. This shows that although Mark Zuckerberg may sell his vision of the metaverse and alternate reality to the world, that metaverse vision could be shortcutted.
There is a lot of pressure on U.S companies right now. Investors believe that if the Federal Reserve increases interest rates in March, it will reduce the industry’s rich valuations after several decades of low-interest rates. This year, the Nasdaq has been beset by falls as it has shed more than 9% in January, making it the worst monthly drop for the index since March 2020.
Kenneth Broux, a strategist at London’s Societe Generale, said that the event “took everyone by surprise. Nobody was expecting the downgrade in earnings outlook for Meta. We could see more volatility in the coming days as the Fed prepares to raise interest rates, and the fall in Meta’s shares has affected the broader equity markets.”
Meta’s selloff did not overshadow the strong earnings report posted by Pinterest and Snap later in the day. They had positive earnings growth of 17% and 52%, respectively. This helped Meta to recover about 1% of its losses.
Meta’s shares have been widely popular to retail investors advocating buying the dip after the widespread selloff of tech stocks in the Nasdaq Composite Index this year. Therefore, several funds were exposed, especially retail investors and hedge funds. Notwithstanding that, some fund managers said they will still buy. For example, one of Laffer Tengler Investment’s portfolio managers, David Jeffress, said Thursday that his firm wants to buy the dip on Meta. He said the company looked at the strong and increasing numbers Meta posted for revenue per user, advertising, and user engagement.
Who’s To Blame For Meta’s Woes
Meta blamed its woes on Apple Inc. Recently, Apple had a change in privacy policy where users could decide if they wanted to see advertising on their devices. This change affected mobile advertising and Meta.
Gene Munster, an analyst at Loup Ventures, said that “Facebook is beginning to see that building on top of Apple impact its business. The policy changes had a bigger impact on Facebook than we all expected.” Facebook is not the only company under Meta that is affected. Since Apple users can now block the tracking of their internet use, Instagram, which makes revenue from mobile advertising, was also hit. As a result, Instagram would lose about $10 billion this year from blocked advertising.
The punishment from Apple is not the only cause. Macroeconomic factors like inflation and supply-chain disruptions that started last year have also affected Meta. Other tech companies are also feeling it.
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