Facebook Inc (NASDAQ:FB) stock continued to tank on Tuesday as the company revealed that CEO Mark Zuckerberg will indeed appear before the U.S. Congress to give his testimony on the data scandal involving Cambridge Analytica. However, he won’t extend the same courtesy to British lawmakers, as it sounds like he isn’t planning on appearing before Parliament. Meanwhile, analysts are still holding steady on Facebook stock, with their repetitive commentary coming across like a broken record.
Mark Zuckerberg to appear before Congress, but not MPs
Initially, it was reported that Facebook CEO Mark Zuckerberg had decided to send one of his deputies to appear before Congress, but following a large amount of backlash, sources told CNNMoney that he will indeed testify before U.S. lawmakers. The media outlet’s sources said the constant pressure not only from lawmakers from also the public and the media made it impossible for the company to justify having anyone but its CEO appear.
CNNMoney’s sources suggested that Mark Zuckerberg might not be the only major tech executive to testify in the data scandal. They believe that his willingness to appear before lawmakers could pressure Twitter Chief Executive Jack Dorsey and Google Chief Sundar Pichai to testify as well. In a move which demonstrates that Facebook isn’t the only one on the hook for what happened to data it was holding, Sen. Chuck Grassley, chairman of the Senate Judiciary Committee, called for all three CEOs to attend a data privacy hearing next month.
Mark Zuckerberg will not testify in London, however, as he told British lawmakers today that he will send two of his deputies to speak to members of Parliament on the data matter.
A broken record on Facebook stock
Facebook stock continued to plunge on Tuesday, tanking another 5% in intraday trading, although CNBC’s Jim Cramer seems to think the shares are close to a bottom. He tweeted a tip for investors looking for the bottom in Facebook stock today, advising them to watch the stock’s volume, which he said will have to dry up in order for it to stabilize.
Today it finally looked like the Facebook stock volume was starting to fall. As of the afternoon, about 68 million shares had changed hands, which is still much higher than the average daily volume. Still, that’s an improvement from the number of shares that changed hands on Monday.
Bank of America Merrill Lynch analyst Justin Post cut his price target for Facebook stock in a note on Tuesday. He still rates it as a Buy, but his price objective moves from $230 to $210 per share due to continuing pressure from headline risks.
Concerns about the FTC’s Facebook data probe
He noted that the Federal Trade Commission’s decision to open an investigation into the company’s data handling practices is especially concerning because it opens up the possibility of civil penalties in connection with violations of data privacy. He recalled a similar investigation of Microsoft’s practices by the FTC and Department of Justice, which lasted more than 10 years, which could mean that it will be many years before the Facebook probe is completed.
Post believes that the main questions the FTC is investigating is whether the social media firm was transparent in its use of data. He also believes regulators want to know if Facebook properly notified users that violations of policy had occurred. He sees a bigger risk of fines being handed out now that the FTC has waded into the fray.
He also noted that an agreement the company struck with the agency in 2012 states that Facebook would have to pay up to $16,000 in civil penalties per violation. Then in 2016, this amount was increased to a maximum of $40,000 per violation in certain cases. Because as many as 50 million users may have been impacted by the data scandal, Facebook could be on the hook for more than $1 trillion in fines, but Post doesn’t believe it will end up being that high. He thinks the FTC “may want to send a message,” although precedent points to the fine being much lower.
Facebook stock plunged by more than 5% in intraday trading on Tuesday, falling as low as $150.75 per share.