Zynga IPO goes north, a big dip in the graph on first day of trade – Part 1
Saturday, December 17th, 2011 5:33:16 by Usman Khalid
Zynga Inc. announced its Initial Public Offering on December 16 to raise a Billion dollars in capital. However, the online gaming company’s equity quest did not go well on the first day of the business.
Initiated at $10 a share, the market took the offer lightly and the share price went down 5 percent within an hour. However, at 12 PM the price took a little hike up three cents that was really a sigh of relief back at Zynga headquarters in San Francisco,
California.
There are many reasons attached to the lacklustre performance of Zynga’s IPO. One of the main reason is the worst management of the first public offering.
There has to be a scarcity of shares in the first public offering so that it creates a demand among the investors and brokers. The company traded 14 percent of stock that was a little high for the IPO. Most companies start at 10% to create a dearth of stock
in the market till the next instalment.
The share price itself was a little high itself for the first offer. Investors hesitate to purchase high priced stock for the first time because of lack of background of the company. The share price is directly proportional to the reputation of the company
and in Zynga’s case, it already in the thick of ambiguity.
Moreover, the initial reports, nature of the business and the times like these are not optimal for IPO of technology companies, whose commodity is mostly virtual in nature.
The nature of business Zynga conducts is already hard for investors to digest. Zynga is an online gaming company and their signature game is FarmVille. Although companies like Electronic Arts have a good reputation built with the same genre of commodities
but online business and social networking dependency on the top of it do not make up to a good reputation.
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Posted by Usman Khalid
on Dec 17 2011. Filed under Business.
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