Zynga shares slump 10 percent below IPO in first day

Summary:While there was hope for Zynga, the largest technology flotation since Google's public debut in 2004, the company's share price dropped by nearly 10 percent in its first day.

At the end of Zynga's first day of public trading today, the company fell to just over $9 a share, in what could be the most disappointing stock market debut for a technology company this year.

In the biggest valuation since Google's initial public offering in 2004, the FarmVille and Mafia Wars game maker's shares dipped below IPO almost immediately.

Trading had initially opened at $11 a share, a dollar higher than its IPO price of $10. But the share price dipped below the crucial IPO benchmark by early afternoon.

Analysts expected at least a mild dip from market opening this morning, based on poor economic conditions, continuing Eurozone worries, and crucially a less-than steady business model.

(Source: Flickr)

Zynga sold 14 percent of its shares in its floatation, more than that of Groupon and almost en par with LinkedIn. But all three major companies tumbled within days of their initial flotation.

Zynga barely made it past the morning coffee-run.

Eyes will be on Zynga to see if it "does a Groupon". The coupon giant began its first day of trading at $28 a share, rose to just over $31 at its peak, and closed below its opening price of $26.

Groupon subsequently plummeted and shows little sign of recovery. It closed today nearly 3 percent below its initial offering price at $22.39 a share.

90 percent of Zynga's game-playing traffic is generated through Facebook. Zynga's business model has been scrutinised by analysts for being almost solely reliant on the 'internal Facebook market'.

Should Facebook's user growth slow, it is likely Zynga's will also.

While Facebook currently has over 850 million using the social network, Zynga has 54 million active users per day, reaching at least 5 percent of the social network's online population.

Related:

Topics: Banking, Legal

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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