Facebook’s stock market debut yesterday, while less than spectacular in itself (share prices remained flat, rising only by 23 cents through great pains), has greatly affected many of its partners and other social media sites, including Yelp, LinkedIn, GroupOn, and Zynga. Despite acquiring OMGPop earlier this year, Zynga’s stocks are reaching miserable lows following Facebook’s IPO, losing 13.4 percent of its value, closing at $7.12.
Many investors had been using Zynga as a means to own a piece of Facebook, but now that Facebook has gone public, many are dumping Zynga in favor of FB stock.
According to Gamasutra:
Zynga shares began their steep decline in the moments before Facebook began trading, prompting a trading halt at 11:37am – a standard NASDAQ procedure for any stock that moves 10 percent or more in a five minute period. That “time out” move typically lasts no more than five minutes (to give investors time to gather their wits). Zynga shares were halted for over 50 minutes over the course of the two curbs, though.
It also doesn’t help that NASDAQ ran into several technical glitches, delaying the start of Facebook’s trading by half an hour. The NY Times writes, “technical glitches may have prompted some panicked selling. The Nasdaq OMX Group posted a number of market status updates during the day, warning that some trade execution messages had been delayed.”
Since Zynga is an intimate partner of Facebook, it makes sense that investor suspicion towards Facebook stocks would affect Zynga. On the Wall Street Journal Blog, it sees many tech investors are turning away from Facebook stocks, believing it was too risky. Greg Fell, CIO of global manufacturer Terex, advised a friend not to buy the stock, saying, “the company is not likely to grow beyond its $100 billion-plus market capitalization in the near term.”
Many also doubt Facebook’s ability to earn revenue through advertising and believe that Facebook’s reliance on its users for advertising is too sketchy to bet on. “Facebook reported $3.7 billion in revenues in 2011, and said it made $1 billion for the first quarter of 2012. Google, by contrast, made $40 billion in ad sales last year, largely from text-based search ads displayed to users.” James Brown, an IT specialist for credit risk at Nomura Securities, also doesn’t plan to buy Facebook stocks, worried that their constant flirting with privacy violations could someday land them in serious trouble with the FTC.
If things don’t shape up for Facebook, Zynga will only continue to suffer losses (which currently amount to $130 million). Don’t worry, though—it’s okay to feel some amount of schadenfreude as you watch a bully get his due.