Economic guru Jim Cramer warns that Facebook's top executives can't be trusted to handle the social media company's data leak fallout.
Facebook has been rocked this week by a whistleblower who said that political consulting firm Cambridge Analytica had improperly accessed information on millions of Facebook users to build detailed profiles on American voters, Reuters reported.
The revelation has knocked nearly $50 billion off Facebook’s stock market value in two days and hit the shares of Twitter and Snap over fears that a failure by big tech firms to protect personal data could deter advertisers and users and invite tougher regulation.
Cramer earlier this week said it may be time for the social network to hire an "internal special prosecutor" to get to the bottom of its data scandal.
"If we trusted [Mark Zuckerberg], we wouldn't need to speak with him," said Cramer, whose charitable trust owns shares of Facebook. CEO Zuckerberg, COO Sheryl Sandberg and Facebook's board "have to recognize that they're nobody" now, Cramer told "Squawk on the Street."
For his part, Zuckerberg’s apology for how his company handled 50 million users’ data did little on Thursday to ease investor worries about the cost to fix mistakes and lawmakers’ dismay that his response did not go far enough.
Five days after the scandal broke, Zuckerberg apologized on Wednesday that mistakes were made and promised to restrict developers’ access to user information as part of a plan to improve privacy protection, Reuters explained.
Zuckerberg’s apology and promises were not enough to ease political pressure on the world’s largest social media company.
However, Cramer said Thursday that much of the outrage could blow over soon. People could get bored of protesting Facebook "and want to see how their friends are doing," Cramer said.
"The American people, including those who trade stocks, will get tired of the story," he added. The Facebook backlash has become a “cottage industry” for people that hate social media, Cramer said.
Wall Street analysts expressed relief that there were no signs so far of a more fundamental shift in the company’s advertising-driven revenue model, but some said there would be costs to shore up its reputation.
Facebook, with more than 2 billion monthly active users, made almost all its $40.6 billion in revenue last year from advertising.
Stifel analyst Scott Devitt cut his price target on Facebook by $27 to $168, while BofA Merrill Lynch slashed its target by $35 to $230.
“Facebook’s current plight reminds us of eBay in 2004 – an unstructured content business built on trust that lost that trust prior to implementing policies to add structure and process,” Devitt said.
“Warren Buffett has his own thing called a “too hard” pile, and we are choosing to put Facebook shares in it,” he wrote.
Facebook shares were down 2.2 percent on Thursday in heavy trading.
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