Zynga Slumps Five Percent on First Day of Trading
The FarmVille and CityVille maker fell a disappointing five percent during its first day as a public company.
The company sold 100 million shares at $10 a share to raise $1 billion in capital.
After pricing the stock at $10 a share late last night, it jumped in early morning trading to as much as $11.50 a share. But shortly after, Zynga’s shares tumbled, trading as low as $9.
To close below the company’s starting price on its first day of trading is not typical.
Only five out of 22 U.S. Internet IPOs this year closed below their issue price, according to the WSJ, which quoted information from Dealogic.
The lower debut will put pressure on the company to climb higher over the next several months, especially for the sake of employees and investors, who were likely hoping for a big pop.
Earlier this year, the company sold shares to investors for $14, which is roughly 30 percent higher than the $10 price. Employees, who were hired more recently, are rumored to have been issued stock options at even higher prices.
But generally, if Zynga doesn’t do well, it could hurt other social media companies, like Facebook, which is looking to go public next year. Facebook derives a big portion of its revenues from games.
It could also negatively impact the valuation of other social game companies — private or public — that use Zynga as a barometer.
Electronic Arts has invested heavily in social games, making the decision earlier this year to purchase PopCap Games for upwards of $1 billion. It has committed to transitioning much of its revenues from physical console game sales to digital over the next several years.
Electronic Arts’ stock fell 72 cents, or 3.4 percent, in after-hours trading to $20.20 a share.
At $9.50 a share, Zynga’s valuation falls to $6.6 billion, and the shares owned by founder and CEO Mark Pincus slump to $1 billion. At this morning’s opening price of $11 a share, the company was worth as much as $7.6 billion, and Pincus’s stake was worth $1.2 billion.
Still, Zynga is the largest game developer on Facebook by far, registering 50 million daily active users. That’s four times greater than its next biggest competitor, Electronic Arts, and it has many more game launches planned in the not too distant future.
The company celebrated its listing today by hosting the Nasdaq at its San Francisco headquarters, where Pincus rang the opening bell this morning.