Facebook reports 83 million dodgy accounts as shares plummet to under $20 for ... - Hamilton Spectator

More than 83 million Facebook users might not be real people, the company reported in filings as its shares reached new lows, falling below $20 for the first time on Thursday.

In trading on the NASDAQ, Facebook Inc. shares fell 78 cents to close at $20.10, a drop of almost 4 per cent on the day. They briefly slipped below $20 a share, falling as low as $19.82, and have plunged by almost half of what they were priced at in their initial public offering earlier this summer.

Some analysts said investors were overreacting to the social media site's filing that said 8.7 per cent of its 955 million user accounts may be duplicates, fakes or wrongly classified. Facebook's business model relies on targeted advertising and growth in the number of real users to draw advertisers.

Duplicates, which comprise an estimated 4.8 per cent of overall accounts, are defined as accounts in addition to a user's main one — a violation of the site's terms of agreement. "User-misclassified" are personal profiles created for businesses, organizations or non-humans, such as pets, which may make up 2.4 per cent of accounts.

"Undesirable" accounts, which represent an estimated 1.5 per cent of nearly 1 billion users, are those set up for nefarious purposes such as spamming.

The Menlo Park, Cal., social networker cautioned the figures are based on an internal review of a limited sample of accounts.

"As such, our estimation of duplicate or false accounts may not accurately represent the actual number of such accounts."

Analyst Brian Wieser of Pivotal Research Group LLC said investors overreacted and the dodgy accounts are a "non-issue," typical of any user-registered service on the web.

"It's as if investors have been looking at Facebook as if they've gone to see the U.S. men's basketball team and were disappointed it didn't come away winning the swimming gold," said Wieser. "The expectations are so incredibly out of whack with the reality at this point."

Last week saw the company release its first earnings report since its $38 IPO in May. Shares fell below $24 after the second-quarter report, which posted revenues of $1.18 billion, up 32 per cent from the previous year, but failed to impress investors.

Stocks continued to tumble this week with the departure of high-level executives, growing doubts of growth potential and reports of dodgy user accounts.

While Facebook's 955 million users represent a 29 per cent increase over the previous year, the social networkers anticipated in its filings that its user growth rate will decline over time as it reaches higher market penetration.

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