Shares of Angie's List and Groupon plunged on bad news in the social-media sector

Shares of Angie's List and Groupon plunged on bad news in the social-media sector (Chart by Ycharts / August 14, 2012)

Stocks in the beleaguered social-media sector keep heading down.

Shares of Angie’s List Inc. and Groupon Inc.  plunged Tuesday as investors continued their retreat from the formerly red-hot sector.

Angie’s List, the consumer-review website, fell sharply as a ban on insider sales expired and major shareholders rushed for the exits. Groupon shares sank as investors were rattled by disappointing revenue growth.

The fundamental news hasn’t been all bad -- Groupon’s second-quarter revenue, for example, rose 45%. But investor sentiment has quickly turned against the sector as investors acknowledge that reality isn’t living up to over-inflated expectations.

Angie’s List tumbled $2.12, or 16%, to $11.17. The shares sank below $13, the price of the company’s initial public offering in November.

The shares were done in by the expiration of so-called lockup agreements, which prohibit certain employees and shareholders from unloading their holdings immediately after an IPO.

Lockups are intended to prevent an exodus that can depress a newly issued stock. The goal is to bring out insider shares slowly to prevent excessive damage to a stock.

Trading was heavy, a sign of the fury with which investors exited. Nearly 3.5 million shares traded hands, almost 10 times the daily average volume.

The drubbing of Angie’s List likely is causing jitters among  Facebook Inc.  shareholders. About 1.7 billion Facebook shares will be unleashed on the market in the next few months as a series of lockup agreements expire, a huge supply of overhang that could weigh heavily on Facebook’s already beaten-up stock.

Groupon’s stock shriveled to another new low after the coupon website’s second-quarter earnings report Monday. Its shares slumped $2.04, or 27%, to $5.51 on record trading volume.

GRPN Chart

GRPN data by YCharts

ALSO:

Facebook to Zynga: Social games are growing, not shrinking

Standard Chartered to pay $340 million in money-laundering case

Consumers buying as retail sales in July move higher for first time in four months