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(Bloomberg) — Anxious investors are selling out of social media stocks Friday, putting them on track to lose about $45 billion in market value as they tumbled in premarket trading.
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First came Snap Inc.’s disappointing results. Shares of the maker of the Snapchat platform plunged as much as 29%, after it reported its slowest quarterly sales growth ever, saying a decline in advertising spending continues to drag on results. The selloff spread to peers including Meta Platforms Inc., Alphabet Inc., Pinterest Inc. and Trade Desk Inc. amid concerns that an economic slowdown is deepening and could hurt companies that rely on digital advertising for revenue.
Snap’s quarterly results were the first from big internet companies that depend on advertising, setting the stage for what investors can expect when larger players like Alphabet and Meta Platforms report next week.
The maker of Snapchat as well as platforms like Meta’s Facebook and Alphabet’s Google are competing for a shrinking pool of advertising dollars this year. Spiraling inflation is putting pressure on companies and consumer spending. Meanwhile, new rules from Apple Inc. that require all apps to get smartphone users’ permission to be tracked online have made it more difficult for advertisers to measure and manage their ad campaigns.
“Weakness in brand advertising appears to be the main source of the steep deceleration,” Brent Thill, analyst at Jefferies, wrote in a note. “It’s difficult to parse out how many of Snap’s issues are transitory.”
News that US officials were discussing whether they should subject some of Elon Musk’s ventures to national security reviews, including the deal for Twitter Inc. roiled its shares, fueling a rollercoaster ride in early trading. Twitter had tanked as much as 16% to $43.91 earlier before paring a bulk of those losses when the White House said it was not aware of a national security review for Musk’s ventures.
The stock’s wild ride since Musk announced his offer to purchase the social media platform in April has been on display throughout the year. On Thursday, the arbitrage spread on the proposed takeover was at its narrowest since the deal was announced as Wall Street appeared increasingly confident that the deal would close. Now it’s on pace to fall further below Musk’s offer price of $54.20, on concern that the deal may come under government scrutiny.
Adding to that heap of bad news for tech investors, the possibility that the US could consider expanding its China ban to some of the most powerful emerging computing technologies has put pressure on stocks across the group, with futures contracts on the Nasdaq 100 Index down about 1% lower.
–With assistance from Alex Barinka, Phil Serafino and Abhishek Vishnoi.
(Updates with added details and latest share price moves.)
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