Facebook’s historic fall has shaken stock market investors, wiped out billions of dollars, and is a big wake up call to all investors.
At the end of July 2018, the news of Facebook latest figures caused a massive run on the social network’s stock. The nose dive is the largest one day drop for a public stock in history. Shares fell 20%, wiping out almost $120B in market capitalization. It may just be the beginning.
How to Lose $16B in Just 1 Day
The fall in facebook’s stock value translates to an instant loss of $16B for Mark Zuckerberg’s personal net worth. Unless a turn around is imminent, his days at the head of the tech firm could be numbered.
Despite the drop in personal net worth, Zuckerberg will still likely be just fine financially. He has a diversified personal real estate portfolio. He also has other corporations and structures. Commercial real estate may also be the saving grace of Facebook’s remaining shareholders, and prove to be the company’s best assets.
There are plenty of small things to blame this epic crash on. A limited population, new European internet rules, becoming irrelevant to younger North American audiences, meddling in politics and making enemies by manipulating content are all some of the excuses we will certainly hear in the next few weeks.
What it may all really boil down to is customer service and lack of value for customers. Facebook has taken a lot of heat for turning on early users and contributors and using the popularity they built against them in the form of high cost advertising. The company also recently dealt with issues in misrepresenting advertising data to business users. You simply can’t get away with poor service and continually taking and milking your customers forever. Sooner or later it will bite back.
Cash Now Better Than Stocks
One of the biggest questions that everyone wants to know now is whether this crash can be limited to Facebook or just FANG stocks, or whether it is the beginning of the new crisis we’ve been warned about for a decade.
The Financial Post says that for the first time in 10 years investors are actually better off holding cash than stocks. That’s big news.
Of course cash, CD and bonds are still paying miserable, if not negative net returns. It’s still a big loser from an investment standpoint.
Commercial Real Estate
Based on the above, Canadian commercial real estate is a no brainer for both individual and institutional investors. The total returns and yields are far higher. The downside risks are far, far lower. There are many ways to do it. Yet, when you look at a sector like retail, you see a stark contrast to Facebook, and a medium where people are still craving to engage and can receive real personal service.
Summary
Facebook is feeling the great pain of a big dive in investor confidence and performance. This may or may not be one of the biggest dominos to set the stock market and tech tumbling in a new direction. Cash may be better than stocks, but it is not an appealing option. Commercial real estate is getting a big buy signal right now, especially where investors can find value and attractive yields, and find security to balance out any exposure they have left in tech stocks.