Facebook's 20% Stock Implosion Signalled By Insider Selling, But Is It A Buy Now?

Aitken, Roger. “Facebook's 20% Stock Implosion Signalled By Insider Selling, But Is It A Buy Now?” Forbes, Forbes Magazine, 29 July 2018, www.forbes.com/sites/rogeraitken/2018/07/28/facebooks-20-stock-implosion-signalled-by-insider-selling-but-is-it-a-buy-now/?ss=personalfinance.

Is the fizz going out of Facebook? Well, shares in the social media giant took a hammering in after-hours trading this Wednesday following a revenues miss and an earnings call that left investors sweating. The stock plummeted 24% at one point as the company advised that revenues would continue to slow down and its costs rise.

In becoming the biggest-ever one-day wipeout in U.S. stock market history, Facebook’s market value recovered somewhat, but still declined by 19% to around $120 billion. In so doing, the personal wealth of Mark Zuckerberg, co-founder and CEO of the social networking site, tanked by almost $16 billion over stalling growth. Some analysts described it as a “bombshell” moment and the earnings news caused immediate waves of selling on Wall Street.

While the company, headquartered at 1 Hacker Way in Menlo Park, California, witnessed zero growth in user numbers in North America, in Europe the company lost around a million users.

The loss Facebook’s stock sustained on the day was massive. It was the equivalent of seven times the market valuation of Snap (c.$17 billion), which owns Snapchat, and four times that of Twitter (c.$33 billion). Put another way it equated to the total GDP of Kuwait - some $120.3 billion in 2017 last year, which seems incredible. But the shares are still up around 350% since they floated six years ago.

“I think we were all caught off guard by the extent of the move. However, investors should really have seen something like this coming as insiders at Facebook have been selling shares heavily in recent months,” remarked Neil Wilson, chief market analyst at Markets.com in London in the wake of the earnings release.

Indeed, over the last three months alone insiders - including Zuckerberg - have sold off $3.8 billion worth of stock in the company.

Earnings per share (EPS) actually were a little ahead of forecast at $1.74 versus $1.72 that had been projected. And, revenues were only a tad shy at $13.23 billion compared to the $13.36 billion that had been expected. The numbers for the quarter were not all that bad, however the projected decline in revenues scared investors.