Common Sense: Facebook Falls From Grace, and Investors’ Stock Holdings Tumble Too


After revelations that data harvested from Facebook may have been used to try to influence Britain’s vote to leave the European Union and the United States presidential election, the social network giant faces multiple investigations in both Europe and the United States, along with potentially profit-crimping regulations and limits to its use of data. And investor retribution has been swift.

Since hitting its peak on Feb. 2, Facebook has lost an astonishing $100 billion in market capitalization. Its stock was trading midweek at close to $153 a share, a decline of nearly 22 It rebounded by about 4.5 percent Thursday morning.)

With Facebook’s plunge, investor concerns have spread to other social media and internet stocks with lofty multiples, like the so-called FANG stocks — Facebook, Apple and Amazon, Netflix and Google — and Twitter. They accounted for more than 10 percent of the S.&P. 500 at their peak.

Falling Star

Since 2014, Facebook has been one of the hottest stocks in the market, but its recent troubles have caused it to lose about a quarter of its value.









“People who own an index fund need to realize how important Facebook is, and how big a role it and the FANG stocks played in the market’s rise,” said Howard Silverblatt, senior industry analyst for the S.&P. Dow Jones indices, who oversees statistical analysis for the S.&P. 500. “The FANG leadership is faltering. Social media hasn’t faced much regulation, and now there’s a cloud hanging over those companies.”

In the midst of past Facebook euphoria, few saw this coming. One that did was Aiera, a robot that uses artificial intelligence to make stock recommendations. Aiera, an acronym for artificially intelligent equity research analyst, put out a “sell” recommendation for Facebook last fall.

So did Brian Wieser, a senior analyst at Pivotal Research Group who covers media and internet companies. Although he was positive about the stock for most of its long climb, he downgraded Facebook to “sell” last summer based on regulatory and advertiser concerns and what he now considers “systemic management issues.”

Not only was it a lonely position, but “the stock went up and up,” Mr. Wieser told me this week. “But I thought the market was wrong, full stop.”

“I didn’t know what the catalyst would be, but at some point revenue growth had to slow and the margins go down,” he said. “There are practical limits. And I felt investors were looking at Facebook in much too positive a light. They just ignored all the bad things, and there were a lot of them.”

Then, when the news broke this month that a British firm, Cambridge Analytica, had used Facebook data for voter profiling, Mr. Wieser said, he thought it was “the most significant thing that had happened to Facebook since it became a public company.”

“Most people hadn’t given much thought to how their data is used,” he added. “But this really exposed the potential abuse. This is digital advertising’s original sin, and there’s going to be a reckoning that even now I don’t think most investors fully appreciate.”

The other Facebook skeptic, Aiera, can talk, but Wells Fargo — whose global internet analyst, Ken Sena, developed the robot along with Bryan Healey — wasn’t making its wunderkind available for interviews. But based on Aiera’s published comments, it issued its sell recommendation after analyzing the frequency of negative mentions in the media of Russia’s use of Facebook to influence the presidential election, as well as fundamental valuation and technical factors. (Aiera uses artificial intelligence to read and analyze a half-million pieces of data per day gleaned from the internet. It currently analyzes more than 1,600 stocks.)

Wells Fargo has stressed that Aiera remains in experimental mode, but one potential advantage is that it removes all human emotion from its analysis. Thus, Aiera was indifferent to the fact that nearly every other analyst had a buy recommendation on Facebook.

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With Facebook’s plunge, investor concerns have spread to other social media and internet stocks.

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Drew Angerer/Getty Images

That included her putative master, Mr. Sena, who was thrust into the somewhat awkward position of explaining his own buy recommendation even as Aiera said sell.

When I spoke to him this week, Mr. Sena stressed that Aiera was a tool that could detect patterns and eliminate bias. “Aiera said election interference was a big deal, and it turned out it was a big deal,” Mr. Sena said. “But it’s not meant to supplant human judgments.”

He hasn’t changed his buy recommendation even though he agrees with Mr. Wieser that investors need to take threats of regulation seriously. “The conventional wisdom was that people don’t care that much about how their data is used,” Mr. Sena said. “They like the convenience of targeted advertising. But the level of public outcry over this is new.’’

“Facebook is going to have to do a lot of explaining,’’ he added. “I believe they have the capability and the technology to make the platform secure. But it’s going to distract from other initiatives investors are counting on for growth, like virtual reality and video content.”

Even so, Facebook’s decline has been so steep that even Mr. Wieser and Aiera may reassess their recommendations if they calculate that the stock has bottomed out.

When he last reiterated his sell recommendation, Mr. Wieser’s price target was $152. “I don’t want to be trigger happy on this,” he said. “It’s not clear yet what happens next. I want to fine-tune my thoughts before I revisit this.”

Aiera canceled her sell recommendation after the stock plunged. She hasn’t yet made a new recommendation. Of 45 analysts who cover Facebook, 41 currently have a “buy” or “overweight” recommendation, up from 39 a month ago.

Mr. Sena is even more bullish on Facebook than he was before, and hasn’t changed his price target of $230. “People are still glued to Facebook and Instagram,” he said.

Its price-to-earnings ratio is now just 28, barely above the market average, which makes it “the cheapest stock in our coverage area, and it has some of the best growth prospects,” he said. “There’s no way mathematically to justify a loss of more than $70 billion in market cap.”

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Brian Eno Wants to Take You ‘Inside the Music’


“It’s the right time for the artists that have been using this technology,” said Nicholas Meehan, the founding chairman and artistic director of the Institute for Sound and Music in Berlin, which is building a six-screen, surround-sound projection structure called the ISM Hexadome.

On March 29, Mr. Eno will unveil a different immersive work in the ISM Hexadome, to be presented for the first time in the atrium of the Martin Gropius-Bau museum in Berlin, where he’ll be joined by other artists including Mr. Yorke and Mr. Barri; the composer and producer Ben Frost, collaborating with the visual artist MFO; and the sound artists Holly Herndon and Peter van Hoesen.

After the Berlin show, the mobile structure will tour Europe and America through 2019. Nine works created in Berlin will form the basis of the tour, with newly commissioned ones added at subsequent stops, until the presentation includes more than 20. It will return to Berlin in September 2019.

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“Bloom: Open Space,” an art and music installation in Amsterdam created by Mr. Eno and the musician and software designer Peter Chilvers.

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Herman Wouters for The New York Times

“We’re seeing the beginning of the wave, not even the crest yet, of what’s coming,” Mr. Meehan said in a telephone interview. In addition to virtual reality and augmented reality, what is now emerging is “spatial technology where everyone is experiencing something together,” he said.

In an interview in Amsterdam, Mr. Eno said that he saw “Bloom: Open Space,” which had a limited five-day run here last month, as “the beginning of an experiment” with these new technologies. It is based on “Bloom,” a 2008 smartphone app Mr. Eno created with Mr. Chilvers, which also generates bubbles and tones when the phone’s screen is pressed. Its immersive evolution was “a kind of demo to see how far we could take it with the technology as it stands at the moment,” Mr. Eno said.

Mr. Eno wasn’t entirely enthusiastic about the prospects. “I think there’s something there,” he said, ambiguously. “I’m very aware of the limitations, but I’m also alert to the possibilities.” But he’s attracted to the potential. “I want to be able to be inside the music, to walk around and examine it from different places,” he added. “I don’t feel this is a replacement for other musical experiences. I feel it’s an easy thing to add.”

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Visitors to “Bloom: Open Space” using their thumbs and forefingers to pinch the air in front of them. Doing so makes new bubbles appear, each one emitting a single, precise musical tone.

Credit
Herman Wouters for The New York Times

Mr. Barri, who has made videos for Radiohead and toured with the Chilean-American electronic musician Nicolas Jaar, creates live video effects during his concerts. In the past decade, he’s been developing his own software, Versum, which creates what he calls a “3D real-time virtual world” that is responsive to his input.

During a live performance, Mr. Barri sits at the center of the Hexadome and guides the audience through a musical composition inside his virtual world, using a joystick. “We, the listeners, the viewers, will start at some point in space, and then where we will move will determine what we see or what we hear,” he explains. “It really depends on how I move what music will be heard.”

Mr. Barri doesn’t employ virtual reality goggles because he thinks having “something stuck to your face” is awkward and restrictive. He said much of the technology being developed doesn’t have musicians in mind, so the only way for him to create the work he wants is to “really intensively dive into the programming.”

Mr. Eno, an early member of the band Roxy Music, has had a long career of bending technologies to his alternative sound purposes, like using multiple cassette tapes in the 1980s to create overlapping, unsynchronized sounds, or using 12 high-powered computer-controlled projectors to beam visuals for his musical piece “77 Million Paintings” across the sails of the Sydney Opera House in 2009.

This month, Mr. Eno announced that he would release a CD box set, “Music for Installations,” in May featuring works he has composed since 1986 for mixed-media installations in galleries, airports, hospitals and other public spaces. One piece, “Kazakhstan,” for example, was written to accompany the artist Asif Khan’s 360-degree movie, “We Are Energy,” in the British Pavilion at the World Expo in Kazakhstan.

Like Mr. Barri, Mr. Eno says he feels that musicians are only beginning to explore the potential of immersive tools.

“Philosophically, in terms of our understanding of what it is, we’re right at the beginning,” he said. “But also technically, it is difficult. There’s a slightly awkward imbalance between the complexity of the system and the simplicity of the results.”

“That will change, of course,” he added. “The technology will become more and more transparent, and using it will become less difficult. Right now, it’s quite a struggle remembering that you’re not only trying to get it working, but also trying to do something worthwhile with it.”

Correction: March 19, 2018
An earlier version of this article misspelled the name of the six-screen, surround-sound projection structure being built in Berlin. It is the ISM Hexadome, not the ISM Hexodome.

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