ZNGA's underwhelming debut:
Zynga’s Modest Debut
By EVELYN M. RUSLI
DealBook
New York Times
December 16, 2011, 11:52 am
Zynga’s debut lacked the usual New York fanfare. Instead of photo shoots at Nasdaq’s Times Square locale, Mark Pincus, the founder of the gaming company, rang a makeshift opening bell inside Zynga’s headquarters in San Francisco.
The debut also lacked the usual pop associated with highly anticipated Internet offerings. On Friday, Zynga’s shares rose a modest 10 percent at the open, to $11, before dipping below its offering price briefly. The stock is currently trading at $10.
Zynga’s early trading reflects the broader market for initial public offerings. Newly public technology stocks have been buffeted by macroeconomic turmoil and jittery investors, who remain skeptical about the business models. Several Internet companies have stumbled below their offering prices. Pandora remains more than a third below its price. Nexon, the Zynga of Asia, fell on its first day of trading earlier this week.
According to Renaissance Capital, an I.P.O. advisory firm, the technology sector has recorded 42 I.P.O.’s, worth $8.5 billion, year-to-date. The group has averaged a 20.4 percent gain for the first day of trading, but many have struggled to stay above water. The group has fallen about 15 percent on average since the beginning of the year.
In the coming months, Zynga will be a critical test for the fragile market. Traders are also closely watching the stock to get a sense of how Facebook will fare, when it goes public next year. The social network giant is widely expected to go public in the second quarter of 2012, at a market value more than $100 billion.
Financially, Zynga is on better footing than many of its peers. The company recorded earnings of $30.7 million for the first nine months of this year, on revenue of $828.9 million. It is also the largest gaming company on Facebook, with some 222 million monthly users.
But Zynga also has its fair share of skeptics. User growth has slowed in recent quarters, while marketing expenses remain high. Zynga spent 122 million on marketing and sales for the first nine months of the year, more than all of 2010.
Still, Mr. Pincus, who rang the bell with his wife, Ali Pincus, at his side, had reason to celebrate. At the current price, his 16 percent stake is worth $1.1 billion.
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