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First Suit Filed re: Facebook’s Stock Plunge

First Suit Over Facebook's Stock Plunge Is Filed in Manhattan Federal Court

The first shareholder suit was filed Friday against Facebook in the Southern District of New York over the erasure of $100 billion in value just one day after the social media giant's stock plunged. The 24-page complaint was filed by Pierce Bainbridge Beck Price & Hecht in New York, on behalf of a proposed class defined as people who bought stock in the social media company from Oct. 1, 2017, through July 26, 2018. Facebook Inc. as well as its founder and CEO, Mark Zuckerberg, Chief Financial Officer David Wehner and Chief Operating Officer Sheryl Sandberg are named defendants.

The plaintiffs' lawyers allege that throughout the months leading up to Thursday, Facebook and its top executives "made materially false and misleading statements regarding Facebook’s business and operations," including its adaptation to the European Union's new GDPR data protection requirements, its platform use and revenue growth. The "decline in Facebook’s Platform use and the increase in costs as a result of complying with the GDPR had a materially adverse effect on Facebook’s financial health, including its revenue and projected growth," the complaint states, with the impact of making statements from the company "materially false and misleading."

On Thursday, after Facebook issued a statement the day before about its second-quarter 2018 results, the company's stock price plummeted from $217.50 per share, its closing price on Wednesday, to $174.97 as markets opened Thursday. By the end of the trading week, the price was $174.89. The plunge wiped out more than $100 billion in stock value. Zuckerberg's and Wehner's statements about the GDPR transition—admitting that the service lost 1 million users in Europe—"had a devastating impact on Facebook's stock price," according to the complaint.

"This is a new age," said name partner John Pierce. "We didn't start working on this until yesterday afternoon after I saw news of the stock drop on Fox News during a break in trial prep. No firm can replicate our speed and lethality." David Hecht, a partner at Pierce Bainbridge, said teams on both coasts worked through the night to develop the complaint. It was filed at roughly 4 p.m. Friday, he said. Hecht said the effort involved 3 a.m. handoffs from East Coast-based attorneys to their West Coast colleagues. "It has really been an incredible ride." In addition to "bragging rights," being first to the courthouse offered some tactical benefit, Hecht said.

"There is an advantage in filing first," Hecht said, particularly in engaging with institutional investors that may be substituted as lead plaintiff in the case. The case is captioned Helms v. Facebook. It was not assigned to a judge by late Friday afternoon. A spokeswoman for Facebook said the company was declining to comment.

 

From article:    ALM Media   July 27, 2018
https://finance.yahoo.com/news/first-suit-over-facebook-apos-110014833.html

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Stocks In For Rough Thursday

Tech Reckoning: Tech stocks had never been higher.
Then Facebook reported earnings.
Thursday's going to be ugly.

Facebook's (FB) stock tumbled as much as 24% in after-hours trading Wednesday, after its chief financial officer warned that its sales growth would slow.

Concerned that the problems facing Facebook aren't unique, investors sold off the whole tech sector Wednesday evening. Twitter fell 6%. Amazon and Google were down 2%. Microsoft and Apple fell 1%.

Tech stocks have been on fire in 2018, lifting the broader market along with them. The Nasdaq hit another record high Wednesday, and it's up 15% this year.

Related: Facebook 'puts privacy first' and stock plunges 20%

The best-performing stocks in the S&P 500 read like a list of apps on your phone: Netflix (NFLX)is up 86% this year. Twitter (TWTR) is up 76%. TripAdvisor, AMD, Amazon, Adobe and Salesforce are all in the Top 20.

Just two days ago, the tech sector looked like it may never come down again. Google's earnings were great, even after it got hit with a $5 billion antitrust fine from the European Commission. Last week, Microsoft said its cloud business is going gangbusters.

These are healthy companies, and investors are looking for growth in a market that has been rattled by a looming trade war. Automakers got rocked Wednesday after revealing that steel and aluminum tariffs were crushing their bottom lines. WhirlpoolHarley-Davidson and many other manufacturers reported they had a rough quarter.

Compared to those manufacturers, Facebook is extremely healthy, too. Its sales soared 42% between April and June.

But Facebook's revenue badly missed Wall Street's expectations, and its warning about slower sales growth in the future freaked out investors.

Ross Sandler, an internet analyst at Barclays, called Facebook's deceleration "fairly dramatic."

 

Some of the issues are Facebook-specific, including changing the way it promotes content on its network. But Facebook said its customers are demanding better privacy protections after the fallout from the Cambridge Analytica scandal. The company said it plans to put "privacy first," which could hurt traffic.

The privacy issue could be a problem for Google (GOOGL), Apple (AAPL), LinkedIn-owner Microsoft (MSFT) and especially Twitter.

Article by CNN Money   David Goldman   @DavidGoldmanCNN   July 25, 2018: 7:28 PM ET:
https://money.cnn.com/2018/07/25/technology/business/tech-stocks/index.html​

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90-Minute Facebook Call: 150B Wiped Out

What happened on Facebook's nightmare conference call that
wiped out nearly $150B in market value in 90 minutes?

  • Facebook's stock dropped by a whopping 24% after it announced its second-quarter financial results on Wednesday.
     
  • The plunge came after Facebook executives said the company expected a significant slowdown in its revenue growth in the years ahead.
     
  • Here's what happened during the disastrous conference call with analysts that saw Facebook's value fall by as much as $148 billion.

Facebook CEO Mark Zuckerberg saw shares of his company's stock plunge on Wednesday after it reported earnings and discussed them with analysts.

Facebook CEO Mark Zuckerberg announced a new feel-good statistic on a conference call with financial analysts on Wednesday: Some 2.5 billion people — a third of the world's population — now use at least one of Facebook's products each month.

But that staggering statistic wasn't enough to distract investors from the bad news the company had to share: It expects significantly decreased revenue growth rates and operating margins in the years ahead.

The proof was in Facebook's stock, which during the call was down as much 24% from its price at the close of regular trading. In fact, the call with Zuckerberg and his colleagues only made things worse for Facebook's share price.

An hour before the call started, Facebook announced disappointing second-quarter financial results. The company missed Wall Street's expectations on both revenue and its number of daily and monthly active users.

Its stock fell more than 8% on that news. But it stayed relatively steady after that, at least until the call started and David Wehner, Facebook's chief financial officer, began discussing the company's financial outlook. Wehner warned that Facebook expected its revenue growth to slow from the 42% pace it posted in the second quarter and its operating margins to fall from 44% in the period.

"Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019," he said. "Over the next several years, we would anticipate that our operating margins will trend towards the mid-30s on a percentage basis."

Facebook's stock really fell off during the company's earnings call

During the call, Facebook's stock dropped precipitously. Within minutes it was down 15%, then 18%, then 24%.

At the stock's lowest point, more than $148 billion of the company's value — significantly more than the entire market cap of IBM ($134 billion) — had been wiped out.

Facebook's shares later rebounded, but at the time of this writing they remained deep in the red, down by a little more than 20%.


Facebook's stock plummeted in after-hours trading on Wednesday.

Three key factors are driving Facebook's expected revenue growth decline, Wehner said.

First, Facebook is battling currency headwinds. Its overseas revenue got a boost in dollar terms as the dollar appreciated against other currencies last year. But the dollar's decline this year will reduce the dollar value of Facebook's foreign revenue.

Second, the company is placing more emphasis on Stories, the packages of posts and photos users can share with their friends that generally disappear after 24 hours. The company doesn't make as much money from Stories as it does from its News Feed and other features on its site.

And then there's an increased focus on privacy and security, something that Zuckerberg previously warned could harm the company's profitability. New options Facebook is offering users to opt out of certain data collection — inspired in part by a new privacy law in Europe — could lead to less advertising revenue.

Facebook's expected decline 'is beyond anything we've seen'

As analysts pounded Facebook executives on the call about the company's expected deterioration in its financial results, its stock continued to sink.

Toward the end of the call, a Jefferies analyst seemed astonished at the scale of the growth slowdown, saying it "seems the magnitude is beyond anything we've seen."Wehner warned analysts not to expect the company's financial results to get better anytime soon.

The company is likely to post subpar operating margins for "several years," he said — "more than two, less than many."

It's a staggering drop-off for Facebook and flies in the face of Wall Street's expectations. Earlier Wednesday, its stock hit a new all-time high of more than $218 a share. A few short hours later, that already seems like a distant memory.

Article by Rob Price, Business Insider:
https://www.businessinsider.com/facebook-stock-drops-20-plus-nightmare-earnings-call-2018-7?amp%253Butm_medium=referral

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