Facebook Inc. faced growing pressure on Monday after European and U.S. lawmakers called for investigations into reports that a consultancy that worked on President Donald Trump's campaign had access to data on 50 million Facebook users.
Facebook's shares fell as much as 8.1 per cent to $170.06 US before rallying to $172 in early-afternoon trading. The decline wiped out about $30 billion from the company's market value and dragged the S&P 500 technology sector down almost two per cent. Facebook shares were on track for their biggest one-day percentage decline since October 2014.
"We think this episode is another indication of systemic problems at Facebook," said Brian Wieser, analyst at New York-based brokerage Pivotal Research Group, which already has a "sell" rating on the stock, which rose 60 per cent last year.
Wieser argued that regulatory risks for the company would intensify and enhanced use of data in advertising would be at greater risk than before.
The scrutiny presents a new threat to Facebook's reputation, which is already under attack over Russians' use of Facebook tools to sway U.S. voters with "fake news" posts before and after the 2016 U.S. elections.
The New York Times and the British newspaper the Observer reported on Saturday that political analytics firm Cambridge Analytica had harvested private data on more than 50 million Facebook users to support Trump's 2016 presidential election campaign.
Facebook said on Friday that it had learned in 2015 that a Cambridge University psychology professor had lied to the company and violated its policies by passing data to Cambridge Analytica from a psychology testing app he had built. Facebook said it suspended the firms and researchers involved.
Facebook said the data had been misused but not stolen, because users gave permission.
Cambridge Analytica and its CEO were not immediately available to comment on Monday.
A spokesman for British Prime Minister Theresa May said the allegations were "clearly very concerning …. It is essential that people can have confidence that their personal data will be protected and used in an appropriate way."
Britain's Information Commissioner's Office said it would be considering the potential new evidence as part its separate civil and criminal probe into whether Facebook user data had been abused in British elections.
The head of European Parliament said on Monday that EU lawmakers will investigate whether data misuse had taken place, calling the allegations an unacceptable violation of citizens' privacy rights.
Calls for regulation
Facebook was already facing new calls on Saturday for regulation from U.S. Congress and questions about personal data safeguards after the Times and Observer reports over the weekend.
On Monday, Republican Senator John Kennedy joined his Democratic colleague Amy Klobuchar in calling on Facebook chief executive Mark Zuckerberg to testify before Congress about data use.
In a joint letter, Kennedy and Klobuchar asked Senate Judiciary Chairman Chuck Grassley to hold a hearing with Zuckerberg and the chief executives of Alphabet Inc's Google and Twitter Inc., reflecting mounting bipartisan concern in Washington about how the companies share personal user data.
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