The massive collapse, which erased over $200 billion off Meta’s market capitalization and about $31 billion from Chief Executive Officer Mark Zuckerberg’s net worth, dragged the Nasdaq Composite Index lower.
After the social media behemoth issued a bleak prediction, blaming Apple Inc’s privacy reforms and greater competition, shares of Facebook owner Meta dropped 26% on Thursday, the largest single-day drop in market value for a US corporation.
The massive collapse, which erased over $200 billion off Meta’s market capitalization and about $29 billion from Chief Executive Officer Mark Zuckerberg’s net worth, dragged the Nasdaq Composite Index lower. According to a Reuters study of Refinitiv data, it was the largest drop in market value for a public corporation in the United States.
It was the company’s largest single-day loss since its initial public offering in 2012.
“While Meta CEO Mark Zuckerberg may be eager to seduce the world into an alternate reality,” Laura Hoy, an equity analyst at Hargreaves Lansdown, said, “disappointing fourth-quarter results were fast to bust his metaverse bubble.”
Investors expect policy tightening at the US Federal Reserve will erode the industry’s lofty valuations after years of ultra-low interest rates, putting pressure on big US tech-focused corporations in 2022. In January, the Nasdaq, which is dominated by technology and other growth stocks, plunged more than 9%, its largest monthly drop since the coronavirus-induced market crash in March 2020.
Markets were caught off guard by Meta’s and other firms’ earnings downgrades,” said Kenneth Broux, a strategist at Societe Generale in London.
The tech selloff spilled over into broader equities markets this morning, and with the Fed on the verge of raising interest rates, we could see even more volatility in the future, he warned.
Pinterest and Snap both released good quarterly reports after the market closed, sending their shares up 17 percent and 52 percent, respectively, more than recovering losses from earlier in the day. Their reports also boosted Twitter by 8% and helped Meta reclaim 1% of its lost ground.
According to current data, Meta was a widely owned stock by many investor groups, including hedge funds, potentially exposing a lot of funds to the stock’s wipe-out. Other institutional investors had a significant stake in the company.
It was also a popular stock among ordinary investors, who seemed to be buying the dip with zeal.
Some fund managers saw a motive to invest as well. Laffer Tengler Investments’ portfolio manager, David Jeffress, said on Thursday that the business is looking to increase its holding in Meta as the stock falls. Meta reported strong or improving numbers for user engagement, advertising, and revenue per user, according to Jeffress.
In general, the outcomes were satisfactory. People were alarmed by the guidance “According to Jeffress. The trade declines, he said, were “an overreaction.”
The stock’s collapse was also a bonus for investors speculating on the company’s stock falling. According to S3 Partners, short sellers in Meta were prepared to enhance their potential 2022 gains to more than $2 billion as a result of Thursday’s fall.
With the value of Big Tech companies like Apple and Microsoft skyrocketing in recent years, they’ve grown more vulnerable to investor jitters, culminating in tens of billions of dollars in losses in a single trading day.
On September 3, 2020, Apple lost over $180 billion, while Microsoft lost $177 billion on March 16 of the same year.
As rivalry with rivals like TikTok, the video sharing platform owned by China’s ByteDance, heats up, Meta reported a drop in daily active users from the previous quarter for the first time.
The disappointment with Meta’s earnings and ensuing stock drop brought back memories of the 2000 tech bubble crash. Following the sector’s recent record-breaking run, investors appear to be getting more choosy.
According to research firm Vanda, retail investors focused their purchases in late 2020 and early 2021 on costly tech, electric vehicles, and so-called “meme” stocks. Large-cap tech stock purchases have soared in recent weeks, but speculative assets have seen minimal demand.
Twitter, Pinterest, and Spotify were among the other social media stocks that took a beating on Thursday. Spotify has been embroiled in a controversy concerning COVID-19 vaccine disinformation, as well as releasing unsatisfactory results.
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