A data scandal at Facebook in addition to a possible 3% revenue tax by the EU on large techs, saw Facebook shares dump 6.8%, wiping $37 billion off its value in its worst trading day in 4 years.
Concerns over data mismanagement at the world’s largest social media firm weighed on sentiment, driving technology stock across the board lower by some 2.5%.
Jasper Lawler at LCG Research said: “This is not the first time that Facebook have been caught being lax over their controls; both users and regulators are going to want this to be the last or at least see the firm go to extraordinary lengths to prevent incidences like this happening again. The next few weeks will be crucial as to how Facebook responds to the allegation. Increased regulations have the potential to hit advertising, reducing the principal source of income for the tech giant.”
The Dow wiped out its year to date gains, diving 330 points, the S&P closed 1.4% lower whilst the Nasdaq closed 1.8% lower. All major US indices closed off their lows but that wasn’t sufficient to support trading in Asia -Pacific, which experienced large losses early on. However, it has aided European bourses in heading towards a higher start on the open.
Yesterday Prime Minister Theresa May said allegations that Facebook users’ profiles were mined for data used to produce micro-targeted political adverts without their knowledge “are clearly very concerning”.
“It is essential that people can have confidence that their personal data will be protected and used in an appropriate way,” the Prime Minister’s spokesman said.
“It is absolutely right that the Information Commissioner is investigating this matter. We expect Facebook, Cambridge Analytica and all the organisations involved to cooperate fully.”