Game over? Zynga's IPO may have ended the social media IPO era with a whimper, rather than a bang, as its stock closed at $9.50 -- down $.50 from its asking price.
The lackluster performance contrasted with other recent social media IPOs, including LinkedIn's debut in May, in which the company's stock price doubled and Groupon's, which rose $6 from the asking $20 asking price, on Nov. 4, the day the company went public.
[More from Mashable: Understanding Zynga: A Post-IPO FAQ]
Is this a sign that Wall Street is over its infatuation with social media IPOs? Kevin Pleines, an analyst at Birinyi Associates in Westport, Conn., thinks that may be case. Pleines says that investors have learned their lesson from recent social media IPOs and are curbing their enthusiasm, in this case, at least. "People are a little more skeptical," Pleines says, noting that Zynga's valuation of around $9 billion is absurd when compared to rival EA's $6.9 billion.
Jeffrey Sica, owner of Sica Wealth Management in Morristown, N.J.,agrees. "It's a very telltale sign of how people feel about social media IPOs in general," Sica says, adding that he likes Zynga as a company, but feels the market is too spooked at the moment. "They have become very shortsighted," Sica says of investors. "There's a lot of fear in the market right now."
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The fatigue, however, may be justified. Pleines's research shows that 60% of social media stocks that have gone pubic since 2010 are below their asking price. If you aggregate all those social media stocks, the average price is down 32% from their IPO price.
That said, Zynga's debut on Nasdaq could have been worse. The stock opened at $11, which is 10% above the asking price. It didn't hold on to that gain, but it didn't fall very far, either. Still, Zynga's IPO's fate seems less a reflection on the company itself than on past social media debuts. After all, Zynga is profitable, boasts 227 million active users and is expanding into platforms beyond Facebook, like Google+. "People are focused on the valuation rather than the story," Sica says of Zynga. "Zynga has a very upbeat story to tell."
Meanwhile, Pleines says, the other big social media, Facebook's, may not be subject to the same investor malaise that dogged Zynga. Says Pleines: "They're a different animal because of their sheer size and scope."
This story originally published on Mashable here.
