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Social Media's Valuation Creates Rush for Exits

NEW YORK (TheStreet) -- Amid growing trading volume and aggressiveness during Monday's trading session, investors in Facebook (FB), Zynga (ZNGA), and Groupon (GRPN) liquidated holdings over heightened concerns about the sites' ability to monetize their assets.

Linkedin (LNKD), which also fell during Monday's session, is the only equity in this group of four that's still showing a bullish trend. The remaining three have fallen precipitously since their respective IPOs.

LNKD ChartLNKD data by YCharts

After fully digesting the bargain basement liquidation of DIGG for a reported $16 million over the weekend, investors' risk appetite fell. The reported sale price was considerably lower than the $161 million valuation applied to the company only four years ago in 2008.

Groupon, Zynga and Linkedin began Monday trading advancing over Friday's finish, amid Facebook's gapping opening decline. Facebook was aggressively sold off in the first hour of trading and then languished until, again, in the last hour of trading, when the spike in volume outpaced that of the opening hour.

FB ChartFB data by YCharts

In the final 10 minutes of trading, nearly 2.5 million shares of Facebook changed hands. Facebook closed Monday's trading session near the lows of the day and down for the fifth straight session. (Read why I believe Amazon Isn't Worth Half its Current Price.)

Facebook has no clear support levels due to the relatively short period of time since its IPO, but $26.31 is the next area of technical support, a price level that has been tested only once. Facebook, Groupon and Zynga have failed to demonstrate an ability to sell more than their stocks.

The hope for Facebook almost immediately after becoming a public company is they will be able monetize mobile use. Investors should have focused on mobile immediately before the site went public, as well as the lofty valuation.


TheStreet's Eric Jackson provides another viewpoint on Yahoo and Facebook. (You need a Real Money Pro account to read it, but Jackson's analysis makes it worthwhile.)

Facebook investors face an uphill battle with mobile monetization. Facebook's price-to-earnings ratio is an eye popping 60. That means it will take 60 years of profits to pay for one share of stock.

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