Facebook Shares Just Had Their Worst Day This Year

Shares of social media giant Facebook were continuing to tumble on Monday after a downgrade from Needham. The stock closed down 3.3%.

According to Needham analysts at the firm, there is concern that more executives could leave after the company’s product chief, Chris Cox, resigned last week.

Some insiders had referred to Cox as the “heart and soul” of the company. He has been one of the earliest employees working at Facebook. “Departures will continue, and since we believe that people are a key competitive advantage of FAANG companies, this implies accelerating value destruction,” Needham said.

The firm cut its rating on Facebook from “buy” to “hold.”

According to Needham analyst Laura Martin, Facebook’s pivot toward privacy and encrypted messaging, rising regulatory risk and the upload of disturbing content will accelerate the management exodus. She referred to it as a “Negative Network Effect.”

“We are concerned that regulatory, headline, and strategic pivot risks will negatively impact Facebook’s valuation more than investors currently believe due to the negative flywheel created by Network Effects,” Martin explained. “A Negative Network Effect suggests that departures will continue, and since we believe that people are a key competitive advantage of FAANG companies, this implies accelerating value destruction until senior executive turnover ends.”

Wall Street also learned that state attorneys general are looking into how Facebook and otheer tech companies handle user data.

“You can’t allow this power to accumulate in the hands of the few people, at some point, there’s going to have to be a reckoning for it,” said Mississippi Attorney General Jim Hood said on CNBC’s “The Exchange” this past Friday.

The social media site has also faced backlash for the spread of the New Zealand’s live shooting of a mosque, which was initially streamed through Facebook’s live feature.

Disclaimer: We have no Facebook, Inc. (NASDAQ: FB) and have not been compensated for this article.