After a promising start, Zynga Inc.'s shares dropped below its $10 offering price on the morning of its Friday debut on Nasdaq, dipping to $9.25 a share by early afternoon.
San Francisco's online social gaming company's highly anticipated initial public offering followed the classic pattern exhibited by many other technology IPOs this year: an enthusiastic early reception on the first day of trading followed by a drop in price as investors begin to look more closely at the risks.
With Zynga, the pattern happened much more quickly -- within hours instead of days.
"Their first-day 'pop' has turned into a first-day drop," said Francis Gaskins, editor and president of IPOdesktop.com in Marina del Rey. "Investors have lost their starry-eyed look for social networking stocks."
IPOs from Groupon, Pandora, LinkedIn, Yandex and Zillow, for example, saw their shares surge between 9% and 109% on the first day of trading. All saw their prices fall back to Earth in subsequent days before leveling off in the weeks and months following their debuts.
Zynga chief executive Mark Pincus said in an interview that he was unfazed by the stock's initial performance.
"The value of what we are will be measured in terms of quarters and years, not in terms of trading days," Pincus said. "What really matters is that over the next eight, 12 quarters, we build products that deliver on the promise of social gaming."
-- Alex Pham
Photo: Zynga CEO Mark Pincus and his wife, Ali, at the opening of the Nasdaq on Friday. Credit: Reuters