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Saturday, 17 December 2011

Zynga falls below IPO price for first day of trading

Zynga's share price popped at $11 for the first trade, after being delayed for 20 minutes for the first trade. The stock price represents a 10% jump for the game marker company. However, this small rise in stock price is nothing as compared to the rise for hot stocks like Google when they first listed.

Zynga shares ended lower for the first trading day at $9.50, trading as low as $9 at one point.

The fall in share price was predictable given the weak market outlook and the weak fundamentals that the company has as pointed out by an analyst that they derive over 95% of their revenue from Facebook and sales of in-game items.

Neither are their peers faring well, with Groupon and Pandora hovering near their IPO prices. Zynga if successful would have a share performance which is similar to that of other game markers like EA and Take-Two, with performance very tied to the success of their games which is hihgly unpredictable. Unlike Google which has a product that is used by many and is a cash cow likewise Microsoft's Windows and Office with their enterprise customers.

Advice for investors is that unless you are an expert in trading game markers, avoid this stock as you would likely get burned.

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