Stocks of social media companies such as Facebook, Twitter, and Snap take a hit over concerns of potential regulation

tech2 News StaffMar 21, 2018 07:33:38 IST

Shares of Facebook, Twitter, and Snapchat-owner Snap fell further on 20 March as Wall Street fretted over potential regulatory scrutiny that could hobble the business of the social networks.

Facebook. Reuters.

Facebook lost 4.75 percent after it said it faced questions from the US Federal Trade Commission about how its users’ personal data was mined by a political consultancy hired by Donald Trump’s campaign.

Since revelations on 17 March, that a political consulting firm had improperly obtained personal data of 50 million Facebook users, the world’s largest social media company has lost $60 billion of its stock market value.

(Also Read: Facebook, Cambridge Analytica and the alleged 'data breach': Here's all you need to know)

With concerns that Facebook’s handling of users’ data would lead to stepped up government regulation, social media rival Twitter slumped 9.0 percent and was on track for its worst day since July 2017.

Snap fell nearly 4.0 percent to $15.86, dipping further below the $17 price set in its public listing in 2017.

Adding to regulatory jitters, the Israeli newspaper Haaretz reported that Israel Justice Minister Ayelet Shaked accused Twitter of "lack of cooperation," saying terrorist groups were using the site and that Israel was considering a law to combat such activity.

Longbow Asset Management Chief Executive Jake Dollarhide said his firm’s Twitter stake was in negative territory due to this week’s drop. He has no plan to sell because he believes Twitter faces less regulatory risk than Facebook or Snap.

“The average guy or gal uses it as a news feed,” Dollarhide said. “I don’t know what personal information I’ve ever shared on Twitter.”

New European Union privacy rules that go into effect in May will require letting European users opt out of highly targeted online ads, or face fines of up to 4.0 percent of annual revenues.

San Francisco-based Baker Avenue Asset Management chief investment strategist King Lip said Facebook and other social media companies face more regulatory risk from European governments than in the United States.

Credit reporting agency Equifax’s massive breach of consumers’ sensitive financial data disclosed last September led to government probes but no major regulatory or legal changes.

“Equifax’s breach was far more egregious than the Facebook issue, and there hasn’t been any significant legislation,” Lip said. “I think there’s going to be a lot of chatter about privacy issues surrounding Facebook, but I don’t think any significant legislation is going to be passed.”