

Ask HN: Why is everybody calling Zynga's IPO a failure? - goodweeds

Could somebody with more big-finance clue explain to me why everybody is stating zynga's IPO "a flop"? It seems that the company raised around $1BN today from their initial offering.  The stock has remained flat which means the underwriters priced it fairly. Is it because the underwriters didn't make undeserved profits on the first day like the last few big tech ipos? Zynga still brought in a ton of cash, right? If so, how is that a flop?
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hugo31370
I wouldn't call it a failure but the expectation was for the share price to
pop significantly in the first day. There were rumors that a lot of people who
requested Zynga stock couldn't get it, so this morning's 10% price increase
was lower than expected.

The expectation for "Internet IPOs" is usually pretty high for the first day
and people are speculating that investors were either burned by previous IPOs
(e.g. Groupon) or questioning Zynga's business model.

It's market BS. I wouldn't call it a failure and I'm sure the people at Zynga
are pretty happy with the $1B they just raised.

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lix2333
I think it isn't considered a success for many reasons.

First, there was no excitement generated by the stock. What I mean by this is,
no one was willing to pony up and pay a premium to their offering price. This
has to do less with the academic approach and more with what actually happens
when you help a company do their IPO. Usually when an investment bank helps a
'hot' company do their IPO, they under price it a little bit on purpose. That
way, when it goes to market, the stock jumps 20-50% and the company looks
good, and everything thinks it's a bluechip company. If you come out flat or
your stock depreciates on the first day, it's usually a sign that the market
isn't bullish on your company.

This is especially true for tech stocks because they're supposed to be new and
sexy. If an industrial company does their IPO and their stock is about even
for the day, it doesn't raise many eyebrows. But if a stock that's supposed to
jump 20% stays flat, you can see what the market is feeling about the stock.

The second reason why its considered a failure is due to how fast the
valuation of the company fell. I think a few months or half a year ago, when
Zygna first started talking about their IPO, people were really excited about
it. Initial valuations were something like $15 Billion. In the past few weeks,
they've had to continually lower what their offer price was going to be
because they realized that people were a bit bearish on their stock. So
instead of a $15B valuation, their company is now worth about $7B. Or rather,
Wall Street thinks their company is worth $7B.

Finally, I think the timing was off for them. I think people are pretty
cautious about whether or not this whole internet company thing is going to be
another bubble. People started talking about the bubble when Facebook had
their $50B valuation from Goldman, but nothing really changed until LinkedIn's
stock plummeted recently. This made investors even more wary. Then came the
news that Zynga lost a ridiculous number of users in a month (can't remember
the number but it was something like 200k I think).

All those things combined made this IPO a failure by MARKET standards.

I still think this is a win for the owners. If they could cash out right now,
I bet they would.

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lix2333
Ok, so the part where I said "If they could cash out right now, I bet they
would" was apparently more true than I thought.

Apparently the CEO Mark Pincus sold some of his stock at $14/share in March
and made $100m from it. Why in the world would a CEO sell stock of his own
company before its IPO? Maybe because he needed the money, maybe he wanted to
diversify. It seems a little odd to me that he would do that though.

[http://finance.yahoo.com/news/for-zynga-ceo--cash-came-
early...](http://finance.yahoo.com/news/for-zynga-ceo--cash-came-early.html)

