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Minyanville's T3 Weekly Recap: Facebook IPO Flop Drags Market to Fresh Lows


Plus, news on other social media companies.

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There was not much to "like" today about Facebook's (FB) IPO. The most hyped IPO of all time was a historic flop Friday as Zuckerberg's baby fell flat on its face, closing just above the $38 IPO price (and only held that level because the underwriters stepped in to support it there). Excess supply and an astronomical IPO valuation took any potential juice out of the trade for retail traders, and the Nasdaq essentially broke since it was unprepared for the massive volume of Facebook. The stock easily set the record for shares traded of a new issue.

Facebook bottomed out at the IPO price -- $38 in the first half hour of its public life -- and bounced back to the price it opened for trading ($42.05). After that, it looked like the ship had been righted. However, after consolidating in a range and looking poised to breakout, Facebook inexplicably dropped more than $3 in price action reminiscent of the flash crash. The crazy action was the product of problems with Nasdaq order routing.

Facebook's woes had the most direct impact on related social media type companies. Zynga (ZNGA) triggered circuit breakers down 10% soon after the weak Facebook open, and continued lower throughout the day, finishing down 13.4%. LinkedIn (LNKD) was able to hold up a bit better, shedding a mere 5.6%. Google (GOOG), the last massively hyped IPO, dropped 3.6% amid nasty selling-only days after the stock showed relative strength and broke out of a month-long consolidation.

Apple (AAPL) tried to rally early, surging more than 10 points in the morning, but was smacked down due to the Facebook debacle. The Nasdaq finished down 1.2%, reflecting perhaps that many investors believe the failure of this IPO means at least a short-term top for social media and speculative tech valuations. The IPO market will likely struggle to recover from this type of weak new issue.

The damage was not just limited to fellow social media and tech stocks. The poor performance from Facebook weighed on all major indices, which fell sharply to continue their recent slide. For the Dow, today makes 13 out of 14 days in the red, with losses accelerating in the last two days.

The S&P initially found support at the low end of the 1300-1320 support zone, but broke back below it in the afternoon to achieve the full measure move from the head and shoulders top pattern. The next level to eye is the 200-day moving average, which currently stands at 1278.

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