Facebook hit with class-action suits following stock tumble
This week is delivering a powerful one-two punch to Facebook CEO Mark Zuckerberg. First, on Thursday, Facebook’s stock plummeted 19%, erasing $120 billion in value—the biggest one-day drop in any public company, ever—and personally costing Zuckerberg nearly $17 billion. Now, shareholders are suing for damages based on the claim that the company made false and misleading statements to investors.
At least three suits have already been filed, two in New York and one in California. One of the suits, Helms vs. Facebook, highlights three areas in which the plaintiff argues that Facebook’s public statements fell short: on the implementation of the European Union’s GDPR (General Data Protection Regulation) law, on the cost of complying with GDPR, and on usage of Facebook’s core platform. Another suit points to lack of disclosure around the lower level of monetization associated with Instagram Stories, a feature that the company had touted as a success.
For Facebook, a Wall Street darling even while members of Congress grilled its executives on Capitol Hill, the suits mark a turning point. Quarter after quarter, Facebook has been a remarkably reliable growth machine. In investors’ eyes, it seemed that Zuckerberg and his team could do no wrong, despite controversies over the company’s role in civic discourse, election interference, and more. Facebook was growing so fast, the company seemed capable of outrunning nearly any challenge. But those days are now gone, as the company’s second-quarter earnings call made clear.
As of publication, Facebook had not yet responded to a request for comment.