Dec 172011
Image representing Zynga as depicted in CrunchBase

Image via CrunchBase

“This is the beginning of the second Internet boom.”

Zynga, the online gaming company, kicked off its first day of trading with the usual fanfare.

At the San Francisco headquarters, decorated with huge red banners, its founder, Mark Pincus, rang the opening bell, flanked by his wife, Ali, and the Nasdaq chief, Robert Greifeld. Before a packed room of employees and investors, he made a “raise the roof” gesture in celebration of the initial public offering.

“We brought the Nasdaq here,” said Mr. Pincus, 45. “With our I.P.O., we’re accelerating this mission of connecting the world through games. It’s just getting bigger.”

But the market debut lacked the same pomp.

At the opening, Zynga’s shares rose a modest 10 percent, to $11, and then quickly pulled back. The stock closed at $9.50, or 5 percent below its offering price of $10.

Zynga’s weak performance reflects the broader market for I.P.O.’s. Newly public technology stocks have been buffeted by macroeconomic turmoil and jittery investors, who are skeptical about the business models.

Several Internet companies have stumbled below their offering prices. Pandora is more than a third off its initial price. Nexon, a giant Tokyo-based gaming company, fell on its first day of trading earlier this week.

When Zynga filed its prospectus in July, investors had high expectations for start-ups, particularly those built on social networks. But the market soured in August amid credit pangs in Europe and spikes in volatility.

On the first day of trading, the 42 technology companies that went public this year jumped 20.4 percent on average, according to data from Renaissance Capital, the I.P.O. advisory firm. But they have since struggled, with the group falling 15 percent.

Zynga’s trajectory has followed a similar path. In early summer, insiders pegged the market value of the social gaming company at nearly $20 billion. At its offering price, Zynga, which raised $1 billion, went public at a more muted $7 billion. Its current value is $6.6 billion.

“Raising $1 billion is a large number, particularly in these choppy equity markets where investors seem to be hesitant to take on much risk,” said Peter Falvey, a managing director of Morgan Keegan’s technology group. But “there clearly isn’t a rush to get into the stock at these valuations.”

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