Zynga’s Stock Gets Hammered After Facebook IPO

Posted May 19, 2012

On Friday when Facebook had their IPO, Zynga took a massive hit on the stock market. Since Facebook’s stock did not do too well on opening day, Zynga’s stock fell 13% before they suspended trading. They were able to recover when the stock was down 5.5% before they suspended trading again. Then it finished at 13% down for the day.

The traders were using algorithms that agreed that the stock was hugely overvalued, then undervalued, and then overvalued again according to The Atlantic. The algorithms kept saying “SELL” and “BUY” as the stock price went north and south at a rapid pace. Trading then started resuming at a normal pace again.

The reason why Zynga is directly affected by Facebook news is because the company would not be as big as they are without Facebook. Zynga’s Q1 revenue of this year was $321 million. Even though Zynga has a large mobile presence, a bulk of their revenue comes from Facebook.

On Friday Facebook’s shares had almost tanked, but the underwriters prevented it from happening. What happens to the stock price for both companies on Monday will be very interesting.