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Facebook stock drops 7% over Cambridge Analytica controversy linked to Trump campaign

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Facebook is embroiled in controversy after news about the mining of user data.
(Loic Venance / AFP/ Getty Images)

Facebook Inc.’s stock tumbled Monday after the social media company accused a data analytics firm used by the Trump campaign of exploiting ill-gotten data belonging to unwitting Facebook users.

Shares of Facebook sank 6.7% to $172.69 around 9:50 a.m. Pacific time.

On Friday, a Facebook executive said in a blog post that the Menlo Park, Calif., company was suspending data analytics firm Strategic Communication Laboratories and its affiliate Cambridge Analytica.

Facebook said the two companies had failed to delete user data it had acquired in 2015 in violation of the platform’s rules. The user data came from a personality prediction app built by a University of Cambridge psychology professor and was intended to be used only for academic research.

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Instead, the professor passed that data on to a third party — Cambridge Analytica — in violation of Facebook’s platform policies, according to Facebook.

The company said the data collection accessed information of the 270,000 people who had downloaded the app, along with “more limited information” about their friends.

A whistleblower and other reported sources pushed back on that number, with Christopher Wylie, a departed co-founder of Cambridge Analytica, saying that the professor was able to collect data from 50 million Facebook users without their permission, largely by mining the friends of those who had downloaded the app.

Wylie said Facebook sent a letter in August 2016 demanding that the data be destroyed but never verified that it was.

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In an interview Monday on NBC’s “Today,” Wylie said Cambridge Analytica aimed to “explore mental vulnerabilities of people.” He said the firm “works on creating a web of disinformation online so people start going down the rabbit hole of clicking on blogs, websites, etc., that make them think things are happening that may not be.”

The allegations were first reported by the New York Times and the British newspaper the Observer.

Over the weekend, U.S. lawmakers called for more information on how Facebook let this happen. Sen. Amy Klobuchar (D-Minn.) demanded that Facebook Chief Executive Mark Zuckerberg appear before the Senate Judiciary Committee.

Massachusetts Atty. Gen. Maura Healey said her office was launching an investigation.

Although the company is facing heat now, Brian Wieser, senior research analyst at Pivotal Research Group, said in a note to clients Monday that there will be “no near-term tangible impact” on Facebook’s business.

In his note, Wieser said there are “enhanced risks” for the company, including potential regulatory concerns down the road. But, he said, “we don’t think advertisers will suddenly change the trajectory of their spending growth on the platform.”

However, Pivotal Research Group maintains a “sell” rating on Facebook’s stock because the firm thinks there are limits to the company’s growth “relative to the size of the overall advertising economy,” Wieser’s note said.

The Associated Press was used in compiling this report.

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samantha.masunaga@latimes.com

Twitter: @smasunaga


UPDATES:

10 a.m.: This article was updated to include a more recent stock price and comments from Christopher Wylie’s interview on NBC’s “Today.”

9:20 a.m.: This article was updated to include a more recent stock price and comments from analyst Brian Wieser’s note to clients.

This article was originally published at 8:50 a.m.


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