Facebook’s stock tanked in trading Monday (March 19), erasing $36.7 billion in market valuation and hitting a low not seen in four years thanks to its latest privacy scandal, this time with Cambridge Analytica.
With the social media giant facing severe backlash from regulators, politicians and consumer groups in both the U.K. and the U.S., investors sold off shares of the stock in droves, taking other tech names and the broader market down with it. On Monday (March 19), Facebook’s stock ended the day down 6.8 percent to $172.56. Its sell-off brought down the other FAANG stocks which include Facebook, Amazon, Apple, Netflix and Google. At one point in the day, the Dow Jones Industrial Average fell 493 points. The Dow finished the trading session down 1.4 percent at 336 points. Meanwhile, the volatility index (VIX) increased 25 percent as a result.
It all stems from a disclosure late last week that Cambridge Analytica, a political consulting firm that worked for now-President Donald Trump in the 2016 U.S. election, got access to data on 50 million users — and instead of deleting it, used it to impact the election. Lawmakers and regulators in the U.S. and the U.K. announced investigations into the incident. Massachusetts Attorney General Maura Healey said over the weekend that her office is launching an inquiry into how Facebook data is used. She wants to know what policies, if any, were violated, what the data was used for and if there were any legal implications and ramifications, reported CNN at the time. “Massachusetts residents deserve answers immediately from Facebook and Cambridge Analytica. We are launching an investigation,” Healey tweeted.
Meanwhile, the Financial Times reported that the U.K.’s Electoral Commission is also looking into the incident and Facebook. “Allegations of misuse of Facebook user data are an unacceptable violation of our citizens’ privacy rights,” said Antonio Tajani, president of the European Parliament. “The European Parliament will investigate fully, calling digital platforms to account.”
Also, Democratic Senator Ron Wyden of Oregon requested a copy of the Facebook privacy statement it put together in 2011 due to a consent order with the Federal Trade Commission, reported the Financial Times. That document requires Facebook to alert users if data about them is being shared with anyone other than their friends.
In response to the uproar, the Financial Times reported that Facebook has hired Stroz Friedberg, a digital forensics company, to audit Cambridge Analytica and Aleksandr Kogan, the Cambridge professor who used a mobile app to collect data on Facebook users and then handed it over to third parties including Cambridge Analytica. The forensic firm was told to hold off on launching an inquiry because Elizabeth Denham, the information commissioner for the U.K., is seeking a warrant against Cambridge Analytica. “We need to get in there. We need to look at their databases and look at their servers and understand how data was processed or deleted,” she told Channel 4, according to the Financial Times.