Zynga's Share Price Heads South

Zynga's Share Price Heads South

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Zynga's shares have lost 10% of their initial asking price since last week.

There's a quiet lesson to be learned in childhood adventures involving dish soap and water: the bigger you blow your bubbles, the more likely they are to pop. Prior to Zynga's first appearance on the Nasdaq market on Friday 15 December, analysts suggested that its curiously high share price was a sign of a 90's-dotcom-esque bubble incident in the making. While the long-term truth of that remains to be seen, one thing is certain: Zynga's shares have lost 10% of their value over two consecutive days.

Having started out at their IPO (Initial Public Offering) of $10 per share on 15 December, the shares lost 5% of their value during that day to close at $9.50. Yesterday their value fell further, dipping to a low of $8.74 before closing at $9.04, meaning they've lost just under 10% of their initial value since opening on Friday. While it is worth noting that the Nasdaq itself was down over these two days, that fact alone doesn't explain such a drop in Zynga's share price.

Despite this, Mark Pincus, Zynga's Chief Executive, remains optimistic. Speaking to the Wall Street Journal, he said, "We've taken a long-term view in building this company, and we're not planning to obsess about where our stock price is today."

"There are a lot more days ahead and we want to focus on delivering spectacular results over the next three years, and then we will see where the stock price is then," Pincus continued.

According to analysts, much of the anxiety which led to this wobble centred around the fact that Zynga is almost entirely dependent on Facebook to deliver its games. While its business model is more or less sound, daily user counts have been slowly decreasing over time. Investors are also wary of a Groupon-style slump, and will be watching Zynga's performance carefully as Facebook and other internet-based enterprises consider their IPOs in the New Year.

While there shouldn't be any major Zynga market-ticker-based drama between now and the end of the financial sector's festive hibernation period in early January, the company's early performance should give those inclined to such thoughts a decent amount to chew on. What is a zeitgeist social gaming company to do after it goes public? Can anyone apart from Google and a select few others survive as web-based enterprises on the stock market? Crucially, will this affect the prices of animal add-ons in FarmVille? Oh, fickle fortune.

Sources: Wall Street Journal, GamesIndustry

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Thank you, Santa, you brought me just what I wished for.

Karma.

This pleases me more then it should.

How does this surprise anyone? It's a fad, it will crash. I, for one, will be very glad to see them go.

I hope those burnt-out programmers that were talking about selling and getting out ASAP already got out.

Hey sometimes capitalism does work!

The_root_of_all_evil:
Thank you, Santa, you brought me just what I wished for.

Karma.

Bet next year you'll wish for the same news from Facebook itself.

Interesting article. I don't agree with the assessment that it was a "90's era dot com bubble" developing. That is a ridiculous thing to say. Zynga quite literally got lucky. So did Steve Jobs and Bill Gates. The only difference is that they got lucky when tech was just starting to become common place (Bill Gates got really lucky in this sense). Now, gaming has to be a long term goal, not short like what happened to Zynga. I think it was a mistake for them to go public, TBH.

Haha, if you look at the hubris of it all, the IPO was half of what EA stock sells at. They would have made a lot more out of their investments if they started lower. Idiots.

DVS BSTrD:
Hey sometimes capitalism does work!

Bet next year you'll wish for the same news from Facebook itself.

Capitalism works all the time. :p

And I think we all hope for this kind of news about Facebook.

I think I speak for everyone when I say "Good".

Zynga is a big canerous pulsating pustule on the left buttock of the videogame world. Now I just hope Facebook dies a similar death.

I believe this sums up my thoughts rather nicely:

http://www.youtube.com/watch?v=zdCUpiI1MSA

The_root_of_all_evil:
Thank you, Santa, you brought me just what I wished for.

Karma.

I work in the F2P industry. I read the news story and just laughed. Turned to my boss and we both chuckled about it.

We had been discussing how fast we thought it would go down. He said 10% in a week, so he nailed it.

I said it would crumble like a falling star. So I guess I was a little overly optimistic.

I'm not an economist, but it seems like Zynga should have aimed a bit low so there's be an initial bump. Nothing too dramatic, you don't want an initial frenzy doing stupid things to your stock, but enough that early investors feel confident.

In a month's time if it hasn't gone up for it's initial $10 I suspect they'll be hurting.

They should just offer some special -ville item for everyone who buys a stock. Then BAM, couple of million more stocks sold :P

Sorry for not supply a source, but didn't someone said that the whole fad of facebook game developers would crash around half of next year? there would be huge layoffs and alike? just pointing this is maybe the start.

All I can think of to say is. "Crush them".
Which is probably what the market will do. To bad they didn't go public in 07/08 abit after they started. The financial crisis probably would of killed them and saved people from alot of gaming addiction.

Funny thing is, that price would actually probably be at least another dollar or so lower if it wasn't for the fact that Zynga has been buying up its own shares to try and keep the price higher.

Isn't this what you'd call a self-fulfilling prophecy?

Good, good.

I for one never believed that Zynga was worth even close to a billion in the first place.

Good, let them crash and burn.

Oh look, the internet hate train arrived in time for Christmas... and picked up a bunch of people at the Escapist.

Interesting. I don't know if it signals the downfall of Zynga yet but it's worth noting for its potential to signal a weakening in the company. I wonder what would replace Zynga if it went away?

This isn't a killing blow to Zynga, not even close, and the company will still be around for a long time to come, but I'm glad that this happened because maybe it'll finally show the real game developers that the kind of model that Zynga has is not sustainable.

Game devs have been stroking themselves at the thought of Zynga's economic model for too long now, trying to make social games the new "big thing" and hopefully this'll get them to realize how stupid and short sighted that is.

I can't laugh about it since I know stock prices mean fuck all about the real world (well, not entirely - it's a good thermometer for how well people think a company is doing, not more).

But that reminds me of that Checkpoint about the subject. "Popcap turned down a million dollars to work for Zynga, but then took $750 thousand to work for EA. Things are bad for your company when people are willing to work for EA for less."

 

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