Shares of Facebook (Nasdaq: FB), the No. 1 social network, plunged nearly 9 percent Tuesday, three business days after its $16 billion initial public offering, before recovering lost ground.

After falling nearly 9 percent to $30.98 from Monday's close of $34.03, by the close, they had recovered only to $31, down $3.03, 8.9 percent from Monday. The shares were priced Thursday at $38 and traded as high as $42.05 on Friday.

The $16.7 billion IPO of the Menlo Park, Calif., website was the biggest ever in Internet history and ranked second in overall IPO history. The Friday trading debut was marred by trading glitches on the Nasdaq exchange, as well as other problems dealing with order executions and cancellations by its principal underwriter, Morgan Stanley (NYSE: MS).

The U.S. Securities and Exchange Commission announced it will examine the mechanics behind the glitches in the IPO. Chairwoman Mary Schapiro was asked about the Facebook snafu during testimony before a U.S. Senate Committee. The SEC declared the share sale effective in a filing last Thursday, just as the underwriters disclosed the final sale price.

One reason for Tuesday's decline could be a Reuters report that Morgan Stanley's consumer Internet analyst, Scott Devitt, trimmed his earnings estimates for Facebook just as the IPO was in its final pricing. Devitt cut his revenue estimates for Facebook's current second quarter as well as his earnings esimates for the company, investment bankers said.

Facebook reported first quarter net income slid 12 percent to only $233 million, or 10 cents a share, as revenue fell 7 percent to $1.06 billion. Its prospectus was filled with various risk factors warning prospective investors its pace of growth would likely slow down.

The Reuters report also quoted the senior managing partner of of IPO Boutique who said a hedge client who'd attended a roadshow briefing by Facebook executives said they had lowered their sales estimates. As a result, the client shorted the stock on Friday.

The underwriters also disclosed new data in filings with the SEC just prior to the May roadshow that said Facebook's first quarter net income and revenue gains had eased from 2011 as costs rose for sales, marketing, research and development and options awards to employees.

The two other principal underwriters were Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM). Neither has a brokerage network like Morgan Stanley, which allocated only 500 shares each to customers.

As well, the first lawsuits were filed against Nasdaq OMX Group (Nasdaq: NDAQ), which owns the electronic network beset by glitches when the first trading orders for Facebook were placed. One private investor sued in U.S. District Court in Manhattan. The filing could be the first of many.

Meanwhile, analyst Shaw Wu of Sterne Agee in Dallas, maintained his ''buy rating on Facebook shares, with a target price of $46 next year and $59 in 2015 based on assumptions the site will seize marketing opportunites in the smartphone sector as well as in China. He told clients that China could be Facebook's wild card that could allow it to triple revenue and operating income over the next four to five years.

Facebook's fall came despite a general upturn in U.S. stock markets.

Once valued at $105 billion, Facebook's market capitalization has declined to only $66.3 billion in only three trading sessions. The value of CEO Mark Zuckerberg's shares has dropped from about $19.3 billion to about $16.5 billion.