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Facebook shares drop 10%, trip NASDAQ 'circuit breaker'

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In a speedy response to an analyst's negative assessment, Facebook's stock price dove by over 10 per cent in trading on Monday morning, triggering the NASDAQ exchange's "circuit breaker" designed to prevent over-zealous short sellers from further destroying a company's book value.

"What are the shares worth? Perhaps only $15," was the comment in a Barron's article this weekend that helped triggered Facebook's faceplant.

The NASDAQ circuit breaker – painfully explained in a 334-page SEC ruling – is designed, in summary, to "prevent short selling, including potentially manipulative or abusive short selling, from driving down further the price of a security that has already experienced a significant intraday price decline" of 10 per cent.

That would be today's Facebook, which opened the day at $22.86 per share, and as we click "Publish" at half past 11am Pacific time, has rebounded a wee bit to $20.95 per share.

Barron's analyst Andrew Barry, whose Saturday article contributed to the circuit-breaking slide, suggests that "The rapid shift in Facebook's user base to mobile platforms – more than half of users now access the site on smartphones and tablets – appears to have caught the company by surprise."

From his point of view – and traders seem to agree – Zuckerberg and Co. need to figure out how to transition the money-making ad presentations of the social networking site from PCs to smartphones and tablet. And fast.

As of Monday morning, though, the market doesn't appear to have the patience to wait. And to add insult to injury, Facebook now joins another woefully disappointing company, Groupon, whose share price tripped NASDAQ's circuit breaker one week ago today. ®

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