Shares of Facebook Inc declined by more than four percent after some media outlets reported that the Political consultancy who worked on President Trump's campaign got user data of more than 50 million FB users. The decline has led to a decrease of $23.8 billion from the Facebook's market value of $538 billion on Friday. It also led to a slight dip at other social networking companies such as Twitter Inc and Snap Inc. According to the reports, there was a problem with Facebook's business model and if the reports are true, it could also lead to a regulatory scrutiny of the platform.
The European Parliament head said that EU lawmakers would investigate if the personal data of Facebook users has been violated as it can be regarded as a violation of the citizen's privacy rights. Facebook was already facing some issues with the regulations and was being questioned about the safeguards of the data of users after the New York Times and London's Observer published the report. According to the papers, private information of about 50 million Facebook users was used by the data analytics firm, Cambridge Analytica. Even after Facebook's demands that the data be deleted back in 2015, it has not yet been done.
The Analyst at the New York-based brokerage, Pivotal Research Group, Brian Wieser, said that the new reports were an indication of the systemic problem with Facebook. According to him, the regulatory risk is set to intensify and would also put a greater risk of use of the data in advertising. The new reports would also lead to greater scrutiny of how the data was being used for Facebook and if they have been using it behind their back.
The share losses by Facebook is one of the biggest daily falls since the broader market pullback back in February. Facebook shares fell by 4.5% in a single day when Facebook announced that they would make changes to their newsfeed that would hit user engagement. Facebook could calm the regulatory nerves by investing in security, ad content, screening mechanisms and also improved content algorithms.