Dec 16 - Shares of social game maker Zynga opened higher, but quickly dipped below its debut price one day after raising $1 billion in the biggest internet IPO since Google went public. Conway G. Gittens reports.
▲ Hide Transcript
▶ View Transcript
A cheer outside of the Nasdaq as Zynga employees celebrate the stock market debut of the social gaming company.
Zynga, the name behind popular Facebook games like Farmville raised $1 billion the day before in the biggest internet initial public offering since Google went public back in 2004.
But there may already be cause for concern. The stock opened with a modest gain and quickly traded below its $10 offering price in a volatile debut.
Arvind Bhatia is a senior research analyst at Sterne Agee and has a SELL rating on the stock, because, as he says, Zynga's growth is already slowing.
SOUNDBITE: ARVIND BHATIA, SENIOR RESEARCH ANALYST, STERNE AGEE (ENGLISH) SAYING:
"Really what they need is another big hit like Farmville. And they have tried with many titles in the last six months such as Empire and Allies, Mafia Wars, and a few others, Adventure World, Pioneer Trails, but none of those seem to be getting the traction that perhaps one would have hope, in light of the huge network the company has of 200 million plus monthly users, 54 million daily active users. So the results most recently have been less than stellar."
Some analysts point to Zynga's reliance on Facebook as another reason to worry about future growth. Zynga gets about 95 percent of its revenues from Facebook, by selling virtual items for its social games.
Zynga's success has also caught the eye of the competition like software giant Electronic Arts.
So while some investors are ready to play when it comes to social gaming companies, others are not ready to bet the farm.
Conway Gittens, Reuters