Why Facebook Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of freshly public social network Facebook (NAS: FB) have dropped by as much as 14% today, following its historic and potentially overhyped IPO on Friday.

So what: After the IPO priced at $38, shares had popped upward of 18% within the first minute of trading. Today, shares have touched as low as $33, or 13% below the offer price -- and on a broad-market rally day, no less. There's no shortage of well-deserved skepticism over Facebook's lofty valuation, and it seems the IPO glow is fading quickly.

Now what: Other social-media stocks are also falling in lockstep with Facebook's plunge, including social gamer Zynga (NAS: ZNGA) , down 11% at the low, and Renren (NYS: RENN) , down 15% at the low, among others. After seeing social media as one of the most sought-after sectors in tech for the past year, investors may be sobering up to the possibility that Facebook isn't all it's chalked up to be -- especially at these prices.

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At the time thisarticle was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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