What happened

After seven straight days of gains following its IPO on April 18, Pinterest (PINS -3.70%) shares finally hit a wall today. Shares of the virtual pinboard closed down 9.5% as investors seemed to signal that the high-flying IPO had finally hit an equilibrium point.

So what

Pinterest shares sold initially for $19, and the stock had marched steadily higher after flying out of the gates on its IPO day. Today's slide comes after the stock jumped 15% on Monday. 

A woman holds an iPad with a Pinterest board.

Image source: Pinterest.

Last night, Pinterest said that its underwriters had exercised the option to buy 11.25 million shares at the $19 IPO price, a move that should dilute current shareholders by about 2%, though the news isn't surprising considering that the stock is trading over $30 now.

Elsewhere, Pinterest's rivals were busy making news as Alphabet (GOOG -4.66%) (GOOGL -4.72%) fell 7.5% after growth in its ad business slowed, perhaps a warning sign for the broader digital ad market in which Pinterest competes. Facebook (META -3.85%) introduced its brand overhaul at its F8 conference, promising an increased focus on privacy through group interaction and encrypted messaging. CEO Mark Zuckerberg also introduced a new design that played down the News Feed, and instead focused on the messaging app, online marketplace, and its Facebook Watch video platform. 

Such moves could help reassure investors in the social network after the company had fallen victim to a series of scandals around privacy and other issues last year.

Now what  

For Pinterest, the reason for today's sell-off may simply be that the market finally believed the stock had been overbought after seven straight days of gains. But Pinterest investors should keep an eye on rivals like Google and Facebook, the clear leaders of the digital ad market. In order for Pinterest to be successful, it will either need to grab new advertising dollars or take share from the likes of Google and Facebook. 

With a price-to-sales ratio of 21 and still unprofitable, Pinterest will have a lot to prove in the coming weeks as it makes its first report as a publicly traded company.