Please ensure Javascript is enabled for purposes of website accessibility

Why Facebook Stock Dropped Again Today

By Rich Smith – Sep 28, 2021 at 12:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company will testify before Congress to explain why Instagram isn't "toxic for all teens."

What happened

Shares of Facebook (META 1.05%) stock are off 3% as of 10 a.m. EDT trading Tuesday.

That may not sound like much, but on a $1 trillion dollar stock like Facebook, it works out to about a $30 billion decline in capitalization. (For context: Were Twitter to suffer a loss of that magnitude, its stock would be down nearly 60%!)

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

What sent Facebook shares down so much?

You probably recall how, earlier this month, The Wall Street Journal launched a multipart deep dive into Facebook's business, and came up with the "The Facebook Files" investigation at the end of it? Five hard-hitting stories reported on everything from the company's controversial XCheck program (which gives VIP Facebook users carte blanche to post anything they want on the platform) to how human traffickers and armed groups use Facebook to lure victims and spread hate on the internet, despite Facebook's efforts to the contrary.

Well, today's news hearkens back to the second WSJ story from this series, in which the paper reported on internal Facebook documents that described the mental health toll Instagram may be taking on teens who use the platform. As Engadget reports today, "Facebook will publish two internal slide decks detailing its research into how Instagram affects teens' mental health sometime in the next few days."

Initially, the data will be shared only with Congress. On Thursday, Facebook Global Head of Safety Antigone Davis will be testifying concerning the report, and the Journal's interpretation of it, before the Senate Subcommittee on Consumer Protection, Product Safety, and Data Security. But then Facebook intends to share the data with the broader public.  

Now what

Expect outrage to ensue, especially if the data support the Journal's contention that "Instagram is harmful for a sizable percentage of teens, particularly teenage girls."

Facebook's Vice President of Global Affairs and Communications, Nick Clegg, contends that once the data are public, "any reasonable person" will agree that Instagram is not "toxic for all teens and so on." But if he's wrong about that, or if the data are spun in a direction Facebook doesn't like, you have to assume that both consumers and Congress will scrutinize even more closely Facebook's plan to expand Instagram access to children under age 13 if the data suggest this could be harmful to younger children as well -- potentially scuttling the project entirely.

That won't be good news for Facebook's growth prospects -- and that's a big part of the reason Facebook stock is going down today.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$109.92 (1.05%) $1.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.