New York CNN Business  — 

The release of “The Facebook Papers” is a huge black eye for the social media company, one that could lead to even more calls from regulators and politicians in Washington to break up Facebook.

“The Facebook Papers” are a trove of internal Facebook documents based on disclosures made to the Securities and Exchange Commission and provided to Congress by whistleblower Frances Haugen’s legal counsel. The redacted versions were obtained by a consortium of 17 news organizations, including CNN.

Wall Street is clearly sending a message to Facebook: Investors are displeased with the company’s direction. Shares have pulled back from their all-time highs. The stock fell 5% this past Friday alone and is now more than 15% below the peak price it hit earlier this year.

It’s just the latest in what seems like a never-ending saga of screwups and bad headlines for Facebook. Investors, lawmakers, advertisers and users are increasingly furious with Facebook, signaling it might be time for a change in leadership.

The Wall Street Journal previously published a series of stories based on tens of thousands of pages of internal Facebook documents leaked by Haugen. (The consortium’s work is based on many of the same documents.)

Facebook stock has lagged the other FAANGs

The latest revelations further threaten to dampen investor enthusiasm for the social media giant. Facebook’s stock has not done nearly as well as most other top tech stocks.

Over the past two years, Facebook has actually lagged the Nasdaq’s 83% gain by a bit. It’s also trailing the performance of Apple and Alphabet by a wide margin.

Facebook’s shares are up nearly 75% since October 2019, compared to a surge of more than 140% for Apple (AAPL) and nearly 120% for Google owner Alphabet (GOOGL). In fact, Facebook’s shares have trailed all the FAANGs (which also includes Amazon (AMZN) and Netflix (NFLX)) as well as Microsoft (MSFT) and Tesla (TSLA), during the past 24 months.

So maybe there is a need for Facebook to really shake things up given that the stock has been the worst performer of the giant techs of the Nasdaq.

Facebook, which also owns Instagram, WhatsApp, Messenger and Oculus, will report earnings after the closing bell Monday and is widely expected to announce a corporate rebranding that will focus on the company’s growing clout in the so-called metaverse.

Big changes might be needed to silence Facebook critics

Will that be enough to distract investors from the revelations made in “The Facebook Papers”? It doesn’t seem likely, even though profits for the third quarter are expected to rise 18% from a year ago.

So it may be time for Zuckerberg to cede more control of the company to an outsider. Naming chief operating officer Sheryl Sandberg as CEO may not be enough to satisfy skeptics. Given Sandberg’s long tenure with Facebook, critics might not view a promotion for her as a drastic enough change.

But given that Zuckerberg owns shares of the company that have 58% of the voting rights, any change will likely need to be one that Zuckerberg initiates. Pressure from other investors may not be enough.

“It would help if Zuckerberg gave up control but I’m not sure how likely that is,” said Bryan Koslow, principal of Clarus Group, an investment firm that owns Facebook through exchange-traded funds.

Koslow said spinning off Instagram and other measures to break up Facebook could be a start.

“There is a bull’s eye on Facebook’s back. They have these products and services that are considered to be addictive,” he added.

Still, one Facebook shareholder said that until users and advertisers start to leave Facebook in droves, little may change.

“Management’s response to the news flow remains disappointing,” said Daniel Morgan, senior portfolio manager with Snyovus Trust, in an email. “However, the impact of negative press on advertiser spending has been limited in the past, given the platform’s broad reach.”

And Wall Street analysts are following the advertiser money — not the never-ending sea of unflattering headlines about the company.

Along those lines, the consensus price target for Facebook stock is about $417 a share, nearly 30% higher than current levels. According to Refinitiv, 48 analysts have Facebook stock rated a “buy” while only seven have a “hold” on it and just two recommend that investors “sell.”

Facebook has weathered tons of negative publicity before. This time actually might be different.

But unless Facebook customers and users show they truly have had enough — in a manner that impacts ad revenue, earnings and the stock price in a much more meaningful way — then there may be little incentive for Facebook to change its stripes.