Facebook Inc. (FB), beaten down by its involvement in the latest headline data scandal plaguing the industry, could see its share price cut in half, according one bear. (See also: Facebook Stock Is ‘Stuck in the Mud’: Gene Munster.)
Billionaire British investor Jim Mellon spoke to CNBC on Thursday, warning on heightened risk facing FAANG stocks as they are expected to get hit with more regulation and litigation than that which the big banks experienced after the 2008 financial crisis.
Mellon expects Mark Zuckerberg's Silicon Valley giant to suffer "decimation" over its recent crisis, in which data analysis firm Cambridge Analytica allegedly used information on over 50 million Facebook users without their consent to make political ads for the Trump campaign in the 2016 presidential race. As Facebook shed $80 billion in market capitalization on the news, coming off a tumultuous two weeks with a slight recovery as of Thursday afternoon, Mellon says its recent sell-off is just the beginning.
'Fatted Calf' to Shed Half of its Value on Serious Privacy Issues, Says British Billionaire
"The Cambridge Analytica thing is just the tip of the iceberg," said Mellon, who holds generally bearish views on the tech sector overall. "We're going to see decimation of particularly Facebook and quite right, too—it's a trivial use of modern technology and one that's rather sinister." The investor foresees serious issues over user privacy to lead Facebook's stock to halve over the next couple of years.
Alphabet Inc. (GOOGL) is also positioned to lose on more global government regulation due to its massive scale and increased public accountability, according to the British entrepreneur. He sees the Mountain View, California-based search giant being slapped with "enormous" fines around the world, highlighting the approximate $3 billion penalty imposed on the company by the European Union in 2017. Administrations in the U.S. and Europe could potentially force Alphabet to break up its businesses, said Mellon. "These fatted calves are now ripe for the plucking by governments everywhere," stated the investor.
Trading up 4.1% at $159.26 on Thursday afternoon, FB reflects a 9.8% decline year-to-date (YTD) and an 11.6% increase over the most recent 12 months, compared to the S&P 500's 1.5% loss and 11.5% gain over the same respective periods. (See also: 5 Reasons Facebook Is a Bargain.)