This really ends the year on a sour note for the tech IPO market. It's a momentum killer. Heading into next year, all eyes will be on Facebook. But it's not clear there are any other potential IPOs big enough to restore that momentum.
There was an expectation that because Zynga had lowered its offering range and they were offering a limited amount of stock there would be enough pent-up demand among investors that it would get driven up pretty high on the first day as is typical of this kind of offering.
I think there are two things at work here; first off their updated filings with their results the last couple of quarters have not been spectacular. They've been good with increased revenue but it seems like their growth has slowed a bit.
Second, there's some question about their model going forward. there's been some flatness in the number of users playing their games, even dropping a little bit. They had started to talk about their business in terms of what they call the movie studio model, depending on them producing the next hit as it were. Certainly that's doable, but the movie business is not the most dependable, robust business in the world. There's a lot of uncertainty as to how products will perform. So that may have made investors a bit nervous.
The last bit of it may have been a bit of fatigue with the number of offerings we've seen from the social media space. It's worth noting on the whole that the sector has not performed well. A lot of us assumed in some ways that investors would continue to defy logic and bid up the prices on the first day. But if you look at the way the IPOs have performed, the vast majority are under their offering price for the year.
If you want to turn the Zynga performance on its head, you could argue that investors showed a rare bit of logic rather than emotion.
This is a far cry from the heady first trading days of two other local tech companies that went public this year, LinkedIn and Pandora. Investors bid up Pandora shares 9 percent on their first trading day in June and more than doubled LinkedIn's opening stock price in May.
In any event, a one possible narrative emerging in terms of tech stocks is found in this Reuters headline: