How did the Zynga IPO fare? – Mark Pincus, the god of Social Gaming just released his maiden IPO, 2 days ago on NASDAQ.Having being a customer since the last 3 years,i was curious to see how this relatively new company would fare when other IPOs of newbie tech companies in have have scrounged for stock.Even those companies had a pre defined and sustainable action plan for the next five years,but were still axed by investors.
How did the Zynga IPO fare?
So how will an “internet gaming” company show the world believable figures in the years to come?Their numbers look promising and revenues seem to touch the 1Bn mark before the years end,but investors want to see a larger,er,longer picture.Comparable rival EA stock run has improved since its inception a year ago.
But “real world” gamemakers like EA,CAPCOM and SEGA are in a different league.Users buy their games with real money in the real world.Statistics show that less than 5% of all users that play games through Facebook and Myspace pull out their card,and the ironic part is that Zynga now has a higher valuation of 9 billion compared to EA’s 6.6billion.
Trade analysts blast Pincus for not waiting a while before getting the Zynga IPO out, as barely 2% of tech company IPOs reach a level of sustainability above debut price.One thing on everyone’s mind is, what happens when the 5 year agreement with Facebook ends?Facebook is their platform to the world, the medium in which they propagate and without that, what could be the fate of the game-maker?Although FB also benefits monetarily via a 30% cut when users buy ” credits” online.
An investment guru was earlier talking about revenue vs capital raised.He said, the norm ought to be 3x not 10x,which means a company with annual revenues of 1 billion should not raise more than 3 billion in the capital market,but Zynga just did 10 billion which was a far stretch.On the first trading day, the highest stock price could reach was $11.50 after which it slumped back below IPO price of $10 to $9.50.After the IPO everyone is training their eyes on Facebook next.Will it follow suit like the other tech stock debuts this year,or will it prove us all wrong?Lets wait and watch.