Facebooks stock price sinks to its lowest level in more than a year

Facebook co-founder, Chairman and CEO Mark Zuckerberg.Chip Somodevilla/Getty Images

• Facebook shares on Monday sank 3% to their lowest level in more than a year.
• Mark Zuckerberg on Friday told employees that the root cause of Facebook’s leaks was “‘bad morale’ perpetuated by attacks in the media,” according to The Wall Street Journal.
• Facebook came under fire last week after the New York Times published a 6,000-word exposé saying that Definers, a public-relations firm that had a close relationship with Facebook, disseminated research to journalists linking the billionaire George Soros to anti-Facebook movements.
• Both chief operating officer Sheryl Sandberg and CEO Mark Zuckerberg said they had been unaware of Facebook’s involvement with Definers, with Zuckerberg pointing a finger at the company’s communications team.
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Facebook shares tanked more than 3% on Monday, touching an intraday low of $133.82, after CEO Mark Zuckerberg reportedly said the company’s leaks were caused by “‘bad morale’ perpetuated by attacks in the media.” 

On Friday, Zuckerberg described recent negative news coverage on the company as “bullshit” during a question-and-answer session with employees at Facebook’s headquarters in Menlo Park, California, The Wall Street Journal reported. 

The social media company was under fire last week after the New York Times on Wednesday published a 6,000-word exposé saying Facebook leadership took a “delay, deny and deflect” approach to dealing with crises, such as Russian interference during the 2016 presidential election. The report also detailed Facebook’s involvement with Definers, a public-relations firm, which it said disseminated research to journalists linking the billionaire George Soros to anti-Facebook movements.

On Thursday, Zuckerberg and Chief Operating Officer Sheryl Sandberg said they had been unaware of Facebook’s involvement with Definers, with Zuckerberg pointing a finger at the company’s communications team. Sandberg admitted that she “should have” known that the firm was hired and the nature of the work they were conducting.

Facebook cut ties with Definers less than 24 hours after The Times’ story broke.

The Journal reported that many communication people on teams under Sandberg’s watch were angry over Sandberg’s comments, given how closely Sandberg managed Facebook’s media strategy, even involving herself in wording changes.

With shares sitting at their lowest level in more than a year amid negative headlines, Pivotal Research analyst Brian Wieser, a longtime Facebook bear, said he expects more headwinds related to advertiser concerns about morality at Facebook.

“With Facebook, we expect more and more negative press to follow in months ahead on this specific matter,” said Wieser in a note distributed on Sunday.

“Risks from immoral behavior at a corporate level are greater because they create the possibility that a brand could be tarnished by association with the media owner in the future and because it reduces the trust that must exist between different parties in order to manage commercial relationships.”

He has a “sell” rating and a $125 price target — 7% below where shares are currently trading. 

Facebook shares have been under pressure this year. In March, the stock dropped nearly 20%, shedding $50 billion off its market cap, after news broke that the political-research firm Cambridge Analytica accessed 50 million user profiles illegitimately. 

But after Zuckerberg testified to Congress in April, and the company crushed first-quarter earnings, sentiment on the stock has turned around. Shares erased all of their previous losses and rallied to a record high of $218.62 in July.

That was before its second-quarter earnings sent shares tanking by 20%. In a rare miss, the social-media company failed to hit Wall Street’s expectations on sales, profits, and active users, and management warned investors revenue growth will slow down in the coming quarters. Facebook is now trading 39% below its July peak.

Facebook is down about 26% this year.

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