In early February, the capitalization of Mark Zuckerberg’s company fell by $237 billion in a single day. This is the largest drop in the history of the US stock market. We will try to understand the causes and consequences of such a collapse below.
The Collapse of Meta’s Shares on the Stock Exchange
Zuckerberg’s Meta is a tech giant that owns top brands like Facebook and Instagram.
In the February 3 auction, the company lost more than $237 billion in value, which was about 25% of its total value. What is the reason for such a huge loss, which has not been seen by the stock market in America yet?
Experts from BrokersChart, the rating of stockbrokers in Germany, explain this drop by the publication of the company’s profit report for the last quarter of 2021. This, in their opinion, caused such a reaction of the company’s investors.
Reasons for the Drop-in Meta Shares
What is it about Meta’s financial report that could have caused the record drop?
The Meta’s shares for the period were $33.7 billion, falling short of investor earnings projections. The company also failed to live up to forecasts for the number of active network users. These are two main reasons for the collapse.
As a result of the above events, the profit of Zuckerberg’s company amounted to 10.3 billion dollars instead of the expected 11 billion. Also, for the first time in history, the number of daily active users of Meta social networks showed not an increase, but a decrease.
This figure fell from 1.93 billion people a day to 1.929. According to experts, such events could not but affect the fall in the value of the company on the stock exchange.
Record Drops in the Value of Companies in 1 Day
Meta’s drop in value broke Apple’s 2020 record and its own 2018 record. Specialists from BrokersChart have prepared a rating of the biggest drops in the value of companies since 2018. At the moment it looks like this:
- Meta (February 2022) – $237.6 billion;
- Apple (September 2020) – $182 billion;
- Microsoft (March 2020) – $178 billion;
- Apple (March 2020) – $156 billion;
- Apple (September 2020) – $141 billion;
- Tesla (November 2021) – $140 billion;
- Amazon (July 2021) – $138 billion;
- Facebook (July 2018) – $119 billion;
- Apple (March 2020) – $119 billion;
- Apple (December 2021) – $116 billion.
This rating shows that almost every giant company experienced hard times during this period.
Reasons for Meta’s Decline in Popularity and Future Prospects
The main reason for the decrease in the number of active users of its networks Meta considers competition with other companies. In particular, the company is losing the fight for the smallest part of the audience to sites like TikTok.
Now, the monthly number of users of Meta social networks has stopped at around 2.95 billion people. Based on this figure, the company expects to receive between $27 billion and $29 billion in revenue in the first quarter of this year, which is also below the level of expected earnings and could cause a new drop.
At the same time, TikTok is showing steady growth and last year was able to bypass the Google search engine in terms of the number of visits.
Mark Zuckerberg’s reaction was not long in coming. Meta has already stated that the fight against TikTok for a younger audience is the company’s priority for the near future. To do this, the company is actively working on its networks in order to win this competition.