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Zynga shares slump 10 percent below IPO in first day

By | December 16, 2011, 12:05pm PST

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.

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Zynga Inc., IPO, Financial Planning, Investment, Financial Services, Finance, Zack Whittaker

Zack Whittaker, a criminologist who studied at the University of Kent, Canterbury, is a journalist, writer and broadcaster.

Disclosure

Zack Whittaker

I worked briefly with Microsoft UK in 2006 but no longer have any connection with the company. Regardless, I remain impartial and unbiased in my views.

I don't hold any stock or shares, investments or industrial secrets in any company, but have signed confidentiality agreements with a number of UK and U.S. organisations, whose names I am not at liberty to disclose.

I was involved with Kent Union, the University of Kent's student union, undertaking voluntary, non-salaried, elected positions between early 2009 and mid-2010.

No other company, body, government department, non-governmental organisation or third sector organisation employs me or pays me a salary in any capacity whatsoever.

As a freelance journalist, whenever expenses are given and taken by a company that is not CBS Interactive, these will be disclosed in each relevant post to ensure transparency.

I currently work with a UK law enforcement unit, but this is an entirely separate position which bears no connection to other work.

(Updated: 23rd October 2011)

Biography

Zack Whittaker

Zack Whittaker, criminologist who studied at the University of Kent, UK, is a journalist, writer and broadcaster.

After studying criminology at university, though still in his early-20's, he has already had a series unconventional work and voluntary positions. He has worked with researchers studying neurological illnesses like Tourette's syndrome (which he suffers from), has given lectures on the nature of disabilities in the public community, and occasionally ends up speaking on television and radio discussing the events of the day.

He first had academic work published at the age of 22, then still an undergraduate, and has been cited by a wide range of publications: from CNN, the Huffington Post, AllThingsDigital, The Atlantic Wire and CBS News.

Talkback Most Recent of 2 Talkback(s)

  • RE: Zynga shares slump 10 percent below IPO in first day
    Would it have been too painful to go out at a fair valuation (let's say half of what they say they're worth) and raise something like $500 million?

    Everyone is chasing that $1 billion mark as the only marker of success. As though anything less makes you a loser (thank you "Social Network" for helping perpetuate this mania).

    http://mankabros.com/blogs/onmedea/2011/08/03/onmedea-raises-50-at-a-1-billion-valuation/

    Zynga has built up a solid fanbase and a solid company but greed will bring them down. And now that fremium games are beginning to flatline - it's going to be months, not years. I pity the long-term investor.
    ZDNet Gravatar
    JillKennedy
    16th Dec
  • Well anyone who has played Zynga
    @JillKennedy knows that the games while interesting to start, over the long term get expensive and irritating to play. I think I played several of their games for little over a year, but after it got irritating to have the news feed filled up with crap, friends annoyed with all of the game requests, and the never ending money infusions to keep playing the game, gave up, and haven't touch them since.

    I probably got off easier than many people perhaps only dropped 40 or 50 dollars into the game over the coarse of the year I played. It was five or ten dollars here and there, and mostly to fund expansions into the game. Of course game play got stale after awhile too.
    ZDNet Gravatar
    Snooki_smoosh_smoosh
    16th Dec

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