Investors Underwhelmed by Zynga IPO | Adweek Investors Underwhelmed by Zynga IPO | Adweek
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Investors Underwhelmed by Zynga IPO

Should tech startups be worried?

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It looks like investors weren't scrambling to buy a piece of FarmVille.

Social game maker Zynga made its debut on the Nasdaq Friday, and after initially rising from $10 per share to $11, it ended the day at $9.50. That makes it one of the five of this year's 22 Internet IPOs that ended their first day below their IPO price, according to Dealogic.

In some ways, that performance is surprising. Unlike many of the tech companies that went public earlier this year, such as Groupon, Zynga is profitable, and on Thursday Dun & Bradstreet tech specialist Lee Simmons told Adweek that the firm had demonstrated free social games are "a sustainable business model." So the market's lukewarm reception may reflect a general cooling toward tech firms, which doesn't bode well for Facebook or Twitter if they decide to go public next year.

But there were also reasons for Zynga to have a particularly difficult time winning over investors. For one thing, it was selling a larger portion of its total shares, so the greater supply may have lowered the price. One analyst told Reuters that investors are leery of a young company where the board is still controlled by the CEO. And there are bigger concerns about Zynga's long-term prospects, particularly its slowing growth and its dependence on Facebook.

For his part, Zynga CEO Mark Pincus told Reuters that he'll continue to focus on the company's products "and hope the stock market values and appreciates that as they see us deliver it."