Facebook's value slides by $36bn as data breach rocks shares - as it happened

Graeme Wearden and Nick Fletcher

from Economics | The Guardian on 2018-03-19 21:08 (#3JHS3)

All the day's economic and financial news, as social media giant is hit by exposure of data breach involving Cambridge Analytica

9.07pm GMT

Time for a recap:

Around $36bn has been wiped off Facebook's market capitalisation, after its worst day's trading in several years. Shares slumped by 6.7% after a whistleblower revealed a vast data breach that affected tens of millions of people.

9.06pm GMT

Just in: the Connecticut Attorney General is launching an investigation into Facebook.

It will centre on the Observer's revelations that the Facebook profiles of 50 million people were harvested by Cambridge Analytica.

"News reports that personal user information from Facebook profiles was provided to third parties without user consent are concerning and raise serious questions about how this happened in the specific situation involving Cambridge Analytica and about Facebook's policies and practices more generally.

Today, my office has in writing initiated an inquiry asking Facebook to answer a series of questions about this matter.

Connecticut Attorney General launching an investigation into Facebook as a result of Cambridge Analytica scandal. Follows Massachusetts AG announcement https://t.co/VIDg3Jj0Lc

8.45pm GMT

Bloomberg have more details of the growing pressure to make top tech executives face a Capitol Hill grilling:

U.S. Senators Amy Klobuchar, a Democrat from Minnesota, and John Kennedy, a Republican from Louisiana, have called on the chairman of the Judiciary Committee to bring in technology company CEOs, including from Twitter Inc. and Alphabet Inc.'s Google, for public questioning

In a letter Monday to Senator Chuck Grassley, a Republican from Iowa, Klobuchar and Kennedy said they have "serious concern regarding recent reports that data from millions of American was misused in order to influence voters."

8.37pm GMT

Global stock markets are now on their worst run since last November, according to Reuters data.

Facebook was obviously one factor behind today's selloff. But, traders are also worried about a protectionist trade war breaking out. This overshadowed the 'Brexit breakthrough' between the UK and Brussels over a transition deal this morning.

8.14pm GMT

Breaking! Around $36bn has been wiped off Facebook's value today, as trading ends in New York after a rough session.

Shares in the embattled social media giant ended down 6.7% at $172.5. That looks to be its biggest one-day loss in four years (and its biggest drop in value ever).

8.04pm GMT

Facebook's decision to hire a data forensic firm to examine the claims against Cambridge Analytica has caused some concern.

Particularly as the UK Information Commissioner is planning to obtain a warrant on Tuesday to search its offices.

Are we meant to be reassured that Facebook are sending in their own crack team to Cambridge Analytica HQ? What if they come across evidence that incriminates Facebook: will they just leave it there for the authorities to find?

How can Facebook be allowed into Cambridge Analytica's office right now when they are an implicated party and the Information Commissioner is seeking a warrant tomorrow for her staff to go in there?

Quite so, channel 4 news & @DamianCollins. What are #Facebook staff doing tonight at #cambridgeanalytica? Is this how a reputable company behaves in the midst of a crisis/scandal?

7.52pm GMT

New details of Cambridge Analytica's activities are emerging tonight.

Undercover Channel 4 News reporters have recorded CEO Alexander Nix discussing the tactics it used.

In a series of meetings with a reporter posing as a representative of a wealthy Sri Lankan family seeking political influence, Cambridge Analytica executives initially denied the company was in the business of using entrapment techniques.

But Nix later detailed the dirty tricks the company would be prepared to pull behind the scenes to help its clients.

Cambridge Analytica boasts of dirty tricks to swing elections https://t.co/xNUx9OYEyR

7.22pm GMT

7.06pm GMT

Newsflash: Facebook has just released a statement, saying it has hired a forensics firm to investigate the claims against Cambridge Analytica.

The social media giant says that Cambridge academic Aleksandr Kogan, who orchestrated the harvesting of Facebook data, has verbally agreed to take part in the audit. Whistleblower Christopher Wylie has 'thus far declined', Facebook says.

BREAKING: Facebook says it has hired a digital forensics firm "to conduct a comprehensive audit of Cambridge Analytica" https://t.co/jn8limUSe7

6.54pm GMT

The Wall Street selloff is gathering pace.

Facebook's problems seem to be sparking wider alarm in the markets, with investors also worried about the risk of a trade war (and the prospect of a US interest rate rise on Wednesday)

The Dow falls over 450 points https://t.co/cFEWpGMjfc pic.twitter.com/tQ4t5WDxmV

6.46pm GMT

More than $100bn has been wiped off the value of America's biggest tech companies today.

Facebook is the worst performer (-7%), shedding around $35bn at pixel time. According to the Financial Times, that is one of the ten biggest one-day losses (in dollar terms) ever suffered by a technology company.

Facebook leads $118bn wipeout for FAAMNG stocks https://t.co/qAQsdS0iYz

6.22pm GMT

The revelations about how Cambridge Analytica harvested tens of millions of Facebook profiles is fuelling calls for tighter regulation of the tech sector.

And if that happens, the world's largest technology firms could find their growth squeezed, making it hard to justify their immense valuations (Facebook is still worth half a trillion dollars, despite today's share price slide)

"There's the thought that the government might try to regulate tech. You open a slippery slope. If you regulate Facebook what's to say that wouldn't have a domino effect.

Google, maybe Uber?"

6.11pm GMT

US senator Amy Klobuchar, who represents Minnesota, is calling for top tech executives including Mark Zuckerberg to be called to account:

News: @SenJohnKennedy & I just sent bipartisan letter to @ChuckGrassley asking for judiciary hearing w/social media CEOs including Zuckerberg. This isn't the first time we've made this request, but now 50 million people who had their records stolen should add to our numbers!

5.46pm GMT

Facebook's share price is stubbornly in the red, and on track for its worst day in five years:

Facebook shares plunge 7%, their biggest fall since Sept 2012, on reports that data analytics firm Cambridge Analytica harvested private information from more than 50 million Facebook users to help support Donald Trump's 2016 election campaign. pic.twitter.com/6WwY4rigGn

5.31pm GMT

The UK government has weighed in on the unfolding Facebook data story.

Theresa May's spokesman has said the PM backs an investigation by the information commissioner into the use of Facebook data by Cambridge Analytica, adding:

The allegations are clearly very concerning, it's essential people can have confidence that their personal data can be protected and used in an appropriate way.

5.17pm GMT

It's a grim start to the week for stock markets, as a combination of factors leave investors nursing losses.

The technology sector has been hit by the Facebook controversy, and in the UK, the slump in Micro Focus shares following a profit warning.

4.20pm GMT

The Facebook controversy means investors are shying away from risk in general, sayd Chris Beauchamp, chief market analyst at IG:

Markets are in full retreat this afternoon, and the drop has been exemplified by a triple-digit decline on the FTSE 100. The index has returned to December 2016 levels, a remarkable change from last when it was riding high above 7200.

Devoid of big macro data, investors have focused on the growing scandal at Facebook and this has resulted in a full-blown flight from risk. Investors have begun to fear that the social media giant has encountered its first real obstacle, and that further investigation will uncover other data breaches. The market has been in love with Facebook for a long time now, but with questions surrounding other tech giants and their use of data, it could be only a matter of time until others of the hitherto untouchable 'FANG' stocks find themselves dragged into an official investigation.

4.14pm GMT

Another retailer in trouble, as US jewellery and accessories group Claire's files for bankruptcy. The company said its international operations were not included but it does plan to cut back on the number of its stores in Europe.

The full story is here:

3.56pm GMT

It's not getting any better for Facebook. It's shares are now down 7% in the wake of the Cambridge Analytica controversy.

The technology gloom on both sides of the Atlantic, including worries about an EU tax and in the UK the slump in Micro Focus shares, is one of the reasons for the day's market weakness. On Wall Street the Nasdaq Composite is down 2%, while the Dow Jones Industrial Average has lost 280 points or 1.1%.

A sharp decline in tech stocks, US politcal tension between and a 'death cross' on Germany's benchmark DAX index were all weighing on sentiment. Investors are extra touchy in the lead up to Wednesday's FOMC meeting and the first press conference from new Fed Chair Jerome Powell.

The death cross, when the 50 day moving average crosses below the two-hundred day moving average, is a technical indication that the price trend for German stocks has turned downwards.

3.18pm GMT

Back with Facebook, and the company could now face regulation, sayis Peter Garnry, head of equity strategy at Saxo Bank:

Facebook shares are down almost 4% as the Cambridge Analytica Files were revealed over the weekend by the Guardian. The files expose a major data scandal that Facebook did little to contain or correct. This scandal will fuel into the Mueller investigation and potentially pave the way for the regulation of Facebook as the social media platform is a national security asset because people's behaviour can be impacted through the network.

This is move to make technology companies, that are extensively using transfer pricing to avoid taxes in high tax rate countries, to pay more to society. These are just the first signs that major technology companies will be more regulated in the future. It is key for long-term investors in technology to have this on the radar.

2.54pm GMT

On a day when markets in Europe and the US are heavily in negative territory, Barclays is one exception to the rule.

The bank's shares are up nearly 4% after it emerged that activist investor Edward Bramson had taken control of a 5% stake through his Sherborne Investors. It owns 1.94% of the bank's shares directly and the rest of the 5% through derivatives. Russ Mould, AJ Bell investment director, said:

Sherborne has built a formidable reputation for squeezing improved financial and operational performance from the companies in which it invests and Edward Bramson clearly feels that Barclays shares are going cheap, given the prevailing discount to the book, or net asset value. The question now is what the activist investor thinks Barclays should be doing differently and how he intends to get those views across to the bank's boss, Jes Staley.

2.40pm GMT

The fall in Facebook's value has also hit founder Mark Zuckerberg's personal wealth. His stake in the business has fallen by around $4bn in the wake of the Cambridge Analytica controversy.

But don't worry too much. He is still worth around $71bn, making him the world's fourth richest person according to the Bloomberg Billionaires Index.

2.20pm GMT

Facebook is still dropping. It's now down almost 6%! It also just went red on a year-to-date basis https://t.co/SX4EdzKey5 $FB

1.56pm GMT

Today's sell off has wiped some $27bn off Facebook's value, as investors react to the revelations about its relationship with Cambridge Analytica.

1.46pm GMT

Breaking: Shares in Facebook have fallen at the start of trading in New York, after the social media giant was hit by a major data scandal.

Yesterday, the Observer reported that data analytics firm Cambridge Analytica had harvested the Facebook profiles of millions of US voters, and used them to built a sophisticated tools to predict, and influence, how they would vote.

Christopher Wylie, who worked with a Cambridge University academic to obtain the data, told the Observer: "We exploited Facebook to harvest millions of people's profiles. And built models to exploit what we knew about them and target their inner demons. That was the basis the entire company was built on."

Documents seen by the Observer, and confirmed by a Facebook statement, show that by late 2015 the company had found out that information had been harvested on an unprecedented scale. However, at the time it failed to alert users and took only limited steps to recover and secure the private information of more than 50 million individuals.

"We will be contacting Alexander Nix next week asking him to explain his comments".

1.34pm GMT

Ding ding. The New York stock market has opened, and stocks are dropping in a broad-based selloff.

The Dow Jones industrial average has shed around 100 points, or 0.4%, while the tech-heavy Nasdaq is down almost 1%.

1.00pm GMT

Adam Leyland of The Grocer reckons the Conviviality crisis began after it floated on the stock market in 2013, and started executing ambitious takeover deal to consolidate the drinks trade.

He point out that the company changed CFOs last autumn, and has also been hit by recent bad weather and the post-festive slump.

It seems incredible that a business could unravel as quickly as Conviviality has. But with tighter margins and sales commonplace after Christmas, plus tough trading and the snow to contend with, it's not inconceivable that an operation can quickly lose control of cashflow.

And you lose it at your peril.

12.46pm GMT

Newsflash: The CEO of Conviviality, which owns the Bargain Booze and Wine Rack chains, has resigned.

12.03pm GMT

Brexit means colour-coding!

The new draft Brexit deal text has been neatly shaded to show areas where there is full agreement (green), political agreement (yellow) and areas which are still under discussion (white0).

#Brexit : Le show version #Barnier, qui projette derriire lui l'accord de retrait du Royaume-Uni de l'#UE en 3 couleurs pendant sa confi(C)rence de presse : en vert accord formel, en jaune accord politique, en blanc encore en discussion pic.twitter.com/YtIR41PYqx

12.00pm GMT

It's official! Britain and the EU have taken a "decisive step" towards withdrawal agreement, says Michel Barnier in Brussels.

After intensive work, the two sides have jointly published a new version of the draft withdrawal deal for Brexit, says Barnier at his joint press-conference with David Davis.

Michel Barnier on UK/EU transition deal: "We were able to agree on a large part of what will make up an international agreement for an ordered withdrawal of the UK." Says there is still work to do #Brexit

11.38am GMT

Disappointingly, another 46 Carillion workers have been made redundant today by the Official Receiver.

11.20am GMT

The surge in the pound is helping to drag Britain's FTSE 100 down to a two-week low.

Micro Focus is also doing its bit - shares are down a staggering 55% after this morning's gloomy update.

11.04am GMT

A frisson of excitement is rippling through the foreign exchange floors, amid rumours of a Brexit breakthough.

Britain's Brexit secretary David David is meeting with chief EU negotiator Michel Barnier now, ahead of the crunch EU summit later this week.

*EU, U.K. REACH BROAD DEAL ON BREXIT TRANSITION TERMS: WSJ

10.53am GMT

Back to GKN.... and Melrose has swiftly rubbished today's news that America's Dana will list shares in London if it succeeds in merging with GKN's auto business.

A Melrose spokeswoman argues that City investors will still lose out, due to London's listing rules.

'A secondary UK listing will make little difference to the problems it creates for UK holders with Ohio-headquartered Dana maintaining its primary listing on the New York Stock Exchange.

Without a primary UK listing the shares will remain outside the investment mandate of many UK funds who benchmark their performance against the UK indices. Such a listing does not allow indexation, so UK tracker funds can't hold the shares. Perhaps more significantly many of the UK listing rules which govern corporate behaviour, such as shareholder approval for significant acquisitions, do not apply to a standard listing.

10.14am GMT

In a busy morning for takeover news, UK property group Hammerson is fending off an approach from French mall operator Kli(C)pierre.

9.34am GMT

Reuters reckons the takeover battle for GKN is heating up today, with both sides sweetening their pitch to shareholders.

They write:

Melrose, making a hostile bid, said it would inject about 1 billion pounds ($1.39 billion) into GKN's pension scheme, its latest attempt to convince shareholders to back its offer and win over political opponents of the deal.

Shareholders have until March 29 to decide on that offer.

And the GKN story gets yet more convoluted - Melrose trims acceptance condition, said to pump money into pension scheme, while Dana will seek listing after merger with GKN Driveline. Saga. https://t.co/ru85J7o2ok

9.06am GMT

Over in the City, investors have been distracted from the GKN-Melrose battle by a truly grim announcement from tech firm Micro Focus.

Micro Focus having a bad start to the week. Shares down 42% after CEO steps down and company warns of revenue decline. pic.twitter.com/AHAKCqi7o8

8.47am GMT

The unions who represent GKN employees across the UK will demand answers from Melrose over its plans for the company, when they meet today.

Many GKN workers fear for their future, as Melrose's business model is to buy companies, make them more profitable, and then sell them again.

"Melrose's bosses have been far from clear about the detail of their true intentions for GKN beyond vague platitudes and soundbites.

"Question marks remain around the levels of debt Melrose will pile on the company and what it means for jobs, long-term investment and product development.

"GKN's highly skilled UK workforce fear they will end up being sold off piecemeal, with their jobs either axed or shipped overseas to fund a debt-fuelled pay day if Melrose gets its way. That concern over Melrose's short-termism extends to major GKN customers such as Airbus too, which relies on a long-term relationship with GKN to develop the wings of the future.

"If Airbus or other major customers take their business elsewhere it would blow a hole in revenues and destroy jobs and innovation.

8.43am GMT

In another development, Melrose has lowered the 'Acceptance Condition' of its GKN offer, from 90% to 50% plus one share.

That means it has lowered the bar to a successful takeover.

8.34am GMT

GKN has hit back against Melrose's takeover bid.

"Since announcing the deal to bring GKN Driveline and Dana together, I have had the opportunity to speak to many of our shareholders and explain why I am so excited about this prospect.

"The complementary nature of the two businesses and our shared commitment to R&D and long term investment creates a fantastic opportunity to build a world leading company and create meaningful shareholder value by delivering $235 million in synergies.

8.15am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The battle to take control of one of Britain's oldest engineering firms is hotting up today.

"GKN has been run by people who don't have an owner mentality, they have a manager mentality.

"It's a business that has slowly but surely lost the support of the UK institutional investment community."

The proposal we have made to the trustees of up to 1 billion of contributions under our ownership is a clear example of what Melrose does which is good for pensioners and shareholders alike and shows we are a good custodian for all stakeholders.

Melrose's measured approach represents certainty of strategy, value and management. We strongly urge GKN shareholders to accept our offer without delay."

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title	Economics \| The Guardian
Feed Link	https://www.theguardian.com/business/economics
Feed Copyright	Guardian News & Media Limited or its affiliated companies. All rights reserved. 2024