Issue of the week: Zynga’s disappointing debut

Wall Street’s appetite for tech companies may be waning, said Martha C. White in MSNBC.com. Last week’s initial public offering of online gaming company Zynga, maker of such hits as FarmVille, Mafia Wars, and Words With Friends, was supposed to be a market sensation. Instead, the biggest tech IPO since Google’s fizzled. Shares fell within the first hour of trading and closed 5 percent below their $10 IPO price. It was a disappointing debut, especially since Zynga is that rare tech company that actually makes profits, pocketing nearly $31 million in the first nine months of this year.

Zynga’s first-day flop was a “stark departure from other Web IPOs” in 2011, said Shayndi Raice and Randall Smith in The Wall Street Journal. Groupon, LinkedIn, and Zillow all “zoomed out of the gates” before eventually faltering weeks later. Zynga’s fate suggests that investors are jittery over the questionable business models of some tech companies. That skeptical mood may not bode well for Facebook, which is planning a massive IPO in the spring that could value the company at $100 billion. Since Zynga makes the vast majority of its revenues via the social-networking giant, its IPO was considered by some to be an early indicator of how Facebook’s would do.

“Oh, the hand-wringing!” said Henry Blodget in BusinessInsider.com. Pundits have somehow decided that Zynga’s wilting stock price means that the tech bubble has popped and Internet companies are headed for a bust. “Please.” This is a 4-year-old company valued at $7 billion. And in any case, said Kevin Kelleher in Fortune, it “doesn’t make sense to write off a stock’s long-term prospects” after a few days of trading. Particularly not Zynga, which is doing a better job than any other gaming company at “churning out hit after hit.”

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This minor stumble shouldn’t distract us from the bigger picture, said Mark P. Mills in Forbes.com. “In these dismal economic times, it is remarkable” that such a young company can raise $1 billion at its IPO. It illustrates that our tech economy, in all its various forms, has the potential to be “America’s engine of prosperity for decades.” Zynga is at the forefront of that new economy, and “in today’s America, moving ideas and information is a bigger industry than moving people and stuff.” Rest assured: “There is change afoot, exciting times coming, and money to be made.”