Zynga's stock price was expected to go higher than its initial $10 a share price on the first day of trading on Friday. Instead, as Forbes.com reports, the stock for the Facebook-based game publisher actually ended its first day on the NASDAQ stock market in the red, losing 5 percent to settle at $9.50 a share.
What happened? Usually tech-based stock IPOs are greeted, at least on the first day, with a lot of interest by investors. Also Zynga, unlike a lot of other tech companies that have gone public, actually makes a solid amount of revenue and profits from its business model, which is mostly tied into selling virtual items for its games like Farmville and Cityville.
Investors may be wary of buying stock in Zynga, at least in part, because it has a business model that relies on virtual item purchases from its players. Another factor is that most of the company's games use Facebook. Some investors may not care for the fact that Zynga's revenues are tied in so deeply to Facebook, who could change its policies about how companies gain revenue from the social networking site.
In the end, Zynga has to prove to its new stockholders that it can continue to grow its business and also not be reliant as much on Facebook for its money. If it can do that, the stock price will start growing.
17 Comments - Add comment