Why social media stocks are getting murdered this week
Social media may be what all the kids are up to, but it wasn’t what investors liked this week.
Linkedin shares (LNKD) fell 25%, Twitter 25% and Yelp (YELP) 23%.
From the Times:
The performances illustrate the way investors are questioning whether social media companies can keep their growth rates vigorous enough to justify their valuations. The stocks of all three companies had traded at relatively high levels, reflecting Wall Street’s giddy projections. Yet all three shattered that perception in their own way. And while many of these stocks are often volatile, with investors on edge about the weak economy, interest rates and other issues, shareholders increasingly have little tolerance for the slightest misstep.
“Based on where some of these stocks were trading, expectations were already very high and were priced for relative perfection,” said Colin Sebastian, a senior analyst for Robert W. Baird & Company. “The reaction when companies don’t achieve great results can be fairly severe.”
The Times notes that the difficulty these companies face in the public arena could lead other tech startups to avoid heading out on the IPO trail, opting instead to stay private.
For more about Twitter, watch this Fortune video: