He was getting dominated by Serra. It would have better for ego had it been stopped but I can understand him tapping. It sounds like he was pretty messed up from the punishment.
From Serra's blog
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Inside the octagon, when the referee says “Go,” you cease being friends, but once he tapped out, I wanted to make sure he was okay. They didn’t show it, but Pete was down for a little bit after that, and you never want to see anyone get hurt, let alone a friend.
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