Facebook shares tumbled seven per cent Monday on reports that a political consultancy that worked on U.S. President Donald Trump‘s campaign gained inappropriate access to data on more than 50 million users, sparking broader concerns about data privacy and security.
The drop equated to a loss of roughly US$40 billion in total value for the social media giant, according to MarketWatch.
The stock was set for its worst day since September 2012 and was down about 13 per cent from its all-time high hit on Feb. 1, entering what is called correction territory.
The sharp loss for Facebook is dragging other technology companies lower as U.S. stock indexes skid.
Facebook said Friday that the data mining company Cambridge Analytica improperly obtained data on some of its users, and that it had suspended Cambridge while it investigates. Facebook said the company obtained data from 270,000 people who downloaded a purported research app that was described as a personality test.
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The New York Times and the Guardian reported that Cambridge was able to tap the profiles of more than 50 million Facebook users without their permission. Facebook first learned of the breach more than two years ago but hadn’t disclosed it. A British legislator said Facebook had misled officials while Senator Amy Klobuchar of Minnesota said Facebook CEO Mark Zuckerberg should testify before the Senate Judiciary Committee.
Other technology companies also struggled. Microsoft slid $1.86, or 2 per cent, to $92.74.
This is a crisis for Facebook, said Daniel Ives, chief strategy officer and head of technology research for GBH Insights, adding the social media giant will have to work hard to reassure users, investors and governments.
“This is a defining moment for them,” he said. “It either becomes a blip on the radar and it helps the platform mature… or it becomes the start of something broader.”
Ives said Wall Street is more concerned about the latest situation than it was about issues like Facebook’s platform spreading fake news. That’s because Cambridge reportedly got access to the personal data of a large number of users, and the backlash suggests Facebook may face more regulation or could lose users, advertisers or advertising revenue.
He estimated that $5 billion in annual revenue for Facebook might be at risk and that the company has to work hard to assure users and government agencies. He said the situation could create problems for other tech companies, especially Twitter and Alphabet’s YouTube unit.
Alphabet lost $38.85, or 3.4 per cent, to $1,095.57 and Twitter slipped 88 cents, or 2.5 per cent, to $34.70.
— With files from Reuters and Global News