The law of gravity (or slightly more accurate, Newton's third law of motion) suggests that what goes up must come down. This was never meant to describe the stock market, but it often applies, and sometimes to a larger degree than investors would like. Case in point, Facebook's stock recently experienced the biggest single day plunge in its stock market history, and now the social network is facing a lawsuit over what caused this massive dip.
That single day slide equated to a gut wrenching $120 billion loss in Facebook's market capitalization. On Wednesday, shares of Facebook were trading at $217.50, making the company worth around $630 billion. Then Facebook posted its quarterly earnings report, and on Thursday the share price had spiraled all the way down to $176.26. The total loss surpassed the previous record set by Intel eight years ago when its market cap plummeted $90.7 billion in a one day.
Now Facebook, its CEO Mark Zuckerberg, and CFO David Wehner are facing a lawsuit filed by shareholder James Kacouris in Manhattan federal court. The suit alleges Facebook and its top execs made misleading statements or failed to disclose the company's slowing revenue growth, decline in active users, and drop in operating margins.
The lawsuit also claims that Facebook's shares dropped 19 percent in part because of federal securities law violations. Kacouris is hoping for class-action status, and unspecified damages.
In addition to the lawsuit, one of Facebook's shareholders is pushing for Zuckerberg to removed as chairman, Fortune reports. Trillium Asset Management, an activist investor that holds an $11 million stake in Facebook, filed the proposal just hours after the earnings report. The proposed points to several instances of "mishandling," including the Cambridge Analytica scandal and allowing Russia to interfere with the 2016 election.