Facebook’s CEO Mark Zuckerberg gets sued in new blow after shares plummet

JUST a day after Facebook CEO Mark Zuckerberg lost $A160 billion of his fortune to a massive share market plunge, he is in hot water again.

Zuckerberg and Facebook are being sued in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out billions of shareholder wealth yesterday.
The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users.

Kacouris said the marketplace was “shocked” when “the truth” began to emerge on Wednesday from the Menlo Park, California-based company.

He said the 19 per cent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants.

The lawsuit seeks class-action status and unspecified damages.

A Facebook spokeswoman declined to comment.

Shareholders often sue companies in the US after unexpected stock price declines, especially if the loss of wealth is large.

Facebook has faced dozens of lawsuits over its handling of user data in a scandal also concerning the UK firm Cambridge Analytica. Many have been consolidated in the federal court in San Francisco.

Thursday’s plunge also hit Zuckerberg’s bottom-line.

Zuckerberg had been tied with Warren Buffett as the world’s fourth-richest person, but the Berkshire Hathaway chairman’s current $US83 billion ($A112 billion) fortune tops Zuckerberg’s $US66 billion ($A89 billion), Forbes magazine said.

Buffett now ranks third among the world’s billionaires, while Zuckerberg is sixth.

Facebook shares fell another 0.8 per cent on Friday, closing at $US174.89 on the Nasdaq.

Intel previously held that record with a $US91 billion ($A123 billion) one-day collapse back in September 2000.

Founder Mark Zuckerberg, who has a 13 per cent stake in Facebook, saw his fortune dropped by more than $US12 billion ($A16 billion) in less than 24 hours, to around $74 billion ($A100 billion).

The fall came after the social media giant revealed three million European users had closed their accounts since the Cambridge Analytica data scandal. The record decline pushed the tech-heavy Nasdaq more than one per cent lower.

WALL ST FEELS TECH STOCK DROP
Overnight, Wall Street’s major indexes have closed lower as weak earnings reports from major technology companies led to a big drop for the sector.

The pressure on tech stocks started after Facebook gave a dismal forecast that caught investors off guard about growth prospects in a sector that has led the market’s march toward record highs.

“There’s a bit of concern perhaps growing that the bloom’s off the rose for these tech stocks, that they are not invincible,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Twitter shares plunged 20.5 per cent after the social media network reported a decline in monthly active users, versus the increase analysts had expected, and warned of further drops as it deletes fake accounts.

The S&P 500 technology index fell 2.0 per cent, the most among the major S&P sectors.

Shares of Apple, which is set to report quarterly results on Tuesday, fell 1.7 per cent. Shares of Microsoft and Alphabet, which had soared after both companies recently reported strong quarterly results, dropped 1.8 per cent and 2.5 per cent, respectively.

The Dow Jones Industrial Average fell 76.01 points, or 0.3 per cent, to 25,451.06, the S&P 500 lost 18.62 points, or 0.66 per cent, to 2,818.82 and the Nasdaq Composite dropped 114.77 points, or 1.46 per cent, to 7,737.42.

For the week, the Nasdaq shed 1.1 per cent, but the S&P rose 0.61 per cent.

The Dow, cushioned by promising developments in trade relations between the United States and the European Union earlier this week, added 1.57 per cent. Intel and Twitter’s disappointing results overshadowed data from the Commerce Department showing the US economy grew at a 4.1 per cent annualised rate in the second quarter, its fastest pace in nearly four years, on higher consumer spending and farmers rushing soybean shipments to China to beat tariffs.

Economists and investors cautioned against putting too much weight on the growth, which matched expectations, as the trade-related boost is expected to unwind later this year.

“It’s old news,” Ghriskey said.

“Trade is bound to have an impact on the coming quarters if the tariff issue isn’t resolved.” Amazon.com shares jumped as much as four per cent to a record high after the e-commerce giant forecast strong sales and posted a profit that was double analysts’ estimates. The shares closed up 0.5 per cent.