Zynga IPO Falls Flat

Zynga IPO Falls Flat

Posted on 16/12/11 - by Theodor Mavrodis News

The much anticipated IPO of social games developer Zynga did manage to generate more than $1 billion in cash for the company but fell short of expectations and traded below its offering price for much of its first day of trading.

Zynga is the make of immensely popular Facebook games such as FarmVille, CityVille, and Mafia Wars; their games have expanded in to include a wide range of other genres such as casino games, poker, and more.

The company had postponed its IPO before finally launching it last week, selling at the higher end of its range at $10/share before trading opened on Friday. The share price quickly dipped below $10, however, only briefly eclipsing that mark as the day wore on.

Concerns for Zynga

While Zynga is on pace to pull in more than $1 billion in revenue in 2011 -- making its money from selling advertising in its games as well as from charging users to buy boosts and extra features -- analysts are concerned that the company is over-reliant on Facebook and that there are few barriers for competitors to overtake it by offering similar fare.

The IPO places a $10 billion valuation on the company, down from a $20-$30 billion estimated value 6-12 months ago but still a vast sum for a company whose entire business is making games and apps for Facebook.

Zynga Poker is the most popular poker app on the market, with an estimated 30 million active customers that play each month. Online casino and poker sites have eyed the company warily, concerned that it might soon enter the real money poker market -- a venture that Facebook is currently considering in the UK market.