Zynga's embarrassing Wall Street debut

Perhaps the IPO was not as highly anticipated as we thought. Investors didn't think the stock was worth more than its IPO price.

By Kim Peterson Dec 16, 2011 12:54PM
Updated 4:10 p.m. ET

Zynga
(ZNGA) began trading Friday morning after pricing its IPO at $10 a share Thursday. But for investors, that $10 price was a little too rich.

Within the first few minutes of trading, Zynga's stock quickly fell below $10 -- and it would close the day there as well. Despite all the hype leading up to the IPO, investors could not be swayed to jump in. The company originally had hoped to sell shares at $20.

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Zynga is best known for making the "FarmVille" and "CityVille" games played on Facebook. At $10 a share, Zynga's valuation is just under $7 billion.

"Total flop," proclaimed Henry Blodget of Business Insider. "Unimpressive," said investor Paul Kedrosky.

By the close, the stock fell 5% to $9.50. "We can't think of another big-name IPO that has had this embarrassing underwater stock price on day one," wrote Shira Ovide of The Wall Street Journal.

It's unlikely that Zynga's CEO is sweating the details, however. He cashed out in March to the tune of $109 million, selling a small chunk of his stake back to the company for nearly $14 a share, the Journal reports.

Every company wants to see some IPO pop. Falling below the IPO price is a disaster, giving Zynga the wrong kind of momentum. Perhaps Zynga should not have priced at the high end of the $8.50 to $10 range it was considering this week.

Friday's performance is one more sign that the environment for Internet IPOs is not welcoming. Groupon (GRPN) debuted at $20 and lingered below that price for weeks. The stock was flat Friday and closed at $23.04.

LinkedIn (LNKD) skyrocketed from its $45 opening this year but has since fallen from above $100 to close Friday at $65.79.
6Comments
Dec 17, 2011 5:32PM
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How they were able to convince people to invest....OMG...!!  GREED .... The underwriters bought it at 4.00 and they increased it to 10.00 last minute.....and sold more than originally wanted to catch up the  difference as the greedy bustards tried to do for a quick flip.......This market is really crazy!

Zynga hoodwinked soooo many people...Like Pandora..Linkin....Look for Face Book to do the Same thing....There are so many stupidly rich people investing in air and idea's that result in nothing...WHAT A WASTE! The sucker's are getting scarcer and scarcer...!!!

Dec 17, 2011 10:38AM
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A company built on smoke and mirrors that makes a bunch of Facebook annoyware for people who need to kill 5 minutes sitting on the toilet. They don't have any interest in quality. Mark Pincus has openly said he's only interested in taking the money and running. What did investors expect?

 

It will be good to see Zynga fail, and fail hard, once people get tired of all this sappy Facebook adware.

Dec 18, 2011 11:44PM
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Smile Social media, networking and other companies internet need a real world business model. There's only some much push advertising and click revenue and pretty soon we're going to bust that bubble again.  $7 billion for an online game stock?
Dec 16, 2011 9:16PM
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Thanks Douchelord AB!  You think you are God because you are on 30 Rock and you cussed out your daughter and got away with it...you are so into yourself maybe you thought in some way you brought this perfectly good IPO to a higher level (that would have been better without your douchelord ways)...maybe now you should apologize to Zynga...and not on SNL!
Dec 16, 2011 6:56PM
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I would not buy it either ... unless it goes down to 7 maybe.
Dec 16, 2011 6:18PM
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As I recall, Zynga forced it's employees to return their stock options, and then issued them lower quantities of new options. The CEO took a large share for himself, so the employees and new shareholders got screwed. Further proof that capitalism is a deeply flawed economic model that ought to be scrapped.
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