Zynga’s IPO Fails to Pop, Ends 5% Below Offer Price

Zynga finally made its stock market debut on Friday, and it was a pretty disappointing one. Zynga which was valued at $15 – $20 billion just a few months ago, and already decided to list at a valuation of just $7 billion, considering the gloomy macroeconomic outlook, before the IPO window was closed for good.

Jive which went public just a day before Zynga, had a pretty good pop, and is still trading much above its IPO price. Even Groupon, one of the most controversial companies in recent history, is trading around 15% above its offer price.

In its last round of funding, investors bought in at $14 a share, so they are bleeding pretty badly right now.

I’m not saying Zynga didn’t have an inflated valuation, but compared to Groupon or even Jive, it was a much better bet. Zynga is on track to clear more than $1.1 billion in revenue this year, and has been growing rapidly.

There has been a slump in its average user numbers in the past couple of quarters, but some of its new games like CastleVille and Words with Friends have really taken off. Besides, it has been diversifying its offerings on multiple platforms now, like Google+, iOS, Android and its own Zynga Direct, which should be up in 2012, to decrease its dependence on Facebook.

Zynga’s Q4 financials will be out in January 2012. Hopefully, they will be better than Q2 and Q3 numbers, and will boost its stock price.

All of this makes me wonder, why Zynga was so desperate to go public. It had around a billion dollars in cash on its balance sheet, and could have easily waited out the lull in the stock market, to list later when the investor sentiment was more positive. If it wanted to go public so desperately before reporting Q4 financials, you have to wonder – are the numbers that bad? Or is it just bad timing?

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