Mark Zuckerberg's Week Is Going From Nightmare To "Senator Warren Has A Question"

If, for whatever reason (like say, if you're embroiled in an increasingly contentious legal battle with a porn star), you think you're having a bad week, just remember that it could be worse. You could be down $9 billion in two days, which is the situation Mark Zuckerberg now finds himself in as the fallout from the Cambridge Analytica fiasco continues to weigh on Facebook.

Just to be absolutely clear, this is rapidly morphing into a nightmare scenario for the company and reports about Cambridge Analytica's alleged use of "honey trapping" and Ukrainian prostitutes aren't helping.

Although everyone knew it was coming, news that the FTC is set to open a probe hit shares hard first thing Tuesday morning. “The FTC takes the allegations that the data of millions of people were used without proper authorization very seriously," Commissioner Terrell McSweeny said in statement, underscoring the idea that this ain't going away anytime soon.

Meanwhile, it looks like Zuckerberg is going to get himself a good "probing" from lawmakers as multiple committees are now on his ass. Here's a smattering of the headlines that have crossed since lunchtime on Tuesday:

• FACEBOOK TO BRIEF SENATE JUDICARY CMTE TOMORROW: GRASSLEY AIDE
• SENATE COMMERCE CMTE STAFF GETTING FACEBOOK BRIEFING: THUNE
• FACEBOOK TO BRIEF U.S HOUSE ENERGY AND COMMERCE CMTE: REUTERS
• SENATE PANEL IN PROCESS OF SCHEDULING BRIEFING WITH FACEBOOK

Ol' Zuck has also been "invited" to the European Parliament. "Facebook needs to clarify before the representatives of 500 million Europeans that personal data is not being used to manipulate democracy,” the body's President Antonio Tajani said on Tuesday.

And it just goes on and on and on. These headlines are endless and they're still coming in. Particularly disconcerting for probably everyone involved (ill-intentioned or not) is the prospect of whistleblower Christopher Wylie granting an interview to House Intelligence Committee Democrats. And yes, that means he'll be speaking to Adam Schiff who is still beside himself after Devin Nunes shut down the committee's Russia probe earlier this month. Here's WaPo:

A lawyer for Christopher Wylie confirmed Tuesday that Wylie plans to accept the invitation from the committee’s ranking Democrat, Rep. Adam B. Schiff (Calif.).

Schiff said Monday that panel Democrats want to talk to Wylie to determine where and how the Facebook data was stored and used, and whether others — including Russian operatives — had access to it.

“Indeed, it may be that through Cambridge Analytica, the Trump campaign made use of illegitimately-acquired data on millions of Americans to help sway the election,” Schiff said in a statement.

Clearly, that raises all kinds of questions about the direction this could go in, especially in light of what everyone already knows about how Facebook was manipulated for the purpose of spreading misinformation in the lead-up to the election.

Facebook shares are down some 11% already this week and while tech as a whole (i.e. the Nasdaq) is digesting it reasonably well on Tuesday, Twitter is getting hit hard in a further testament to the notion that this could be a veritable Pandora's box.

For her part, Height Capital's Stefanie Miller is going so far as to suggest that "pressure from federal lawmakers may be the precipitating event that turns investors away from these companies"

That sentiment has been echoed in one form or another by others over the past 24 hours including Nomura who wrote the following in a note that's getting quite a bit of attention:

The perception of the accuracy and use of the data are being questioned Part of the explosion in the use of these platforms was the disruption of the conventional distribution and verification of information. Before social media, information was distributed and verified by particular institutions such as press/media companies, universities and government bodies. Today thanks to the increasing concerns that platforms and data-holders have been “gamed” by corporations and foreign governments to manipulate consumers and voters, there is a growing backlash from individuals and governments on how these platforms can operate.

Whether or not this marks some kind of turning point for these companies is obviously debatable, but it's entirely fair to say that the narrative has shifted dramatically over the past 72 hours.

Meanwhile, the massive influx of cash into QQQ last week came pouring back out on Monday, suggesting that flows into and out of everyone's second-favorite retail benchmark tracking vehicle could end up exacerbating swings should things get any worse for the index heavyweights. And please, spare me your bullshit excuses about how ETFs and ETF flows don't pose a risk, because at this point everyone knows they do.

I wish there was a way to make this funnier (and there will undoubtedly be all manner of punchlines over the next couple of weeks as this plays out), but for the time being it just seems bad all the way around.

I'd be remiss if I didn't note the obvious here which is that this has the potential to add further fuel to the raging dumpster fire at 1600 Penn. in the event these Congressional committees stumble on new evidence of election fuckery.

Have a great afternoon and remember, at least you haven't lost $9 billion in the last 48 hours.