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Zynga Officially Goes Public, Analyst Raises 'Significant Concerns'
Zynga Officially Goes Public, Analyst Raises 'Significant Concerns'
December 16, 2011 | By Mike Rose

December 16, 2011 | By Mike Rose
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More: Console/PC, Business/Marketing



As Farmville creator Zynga goes public today, analyst group Cowen and Company has initiated coverage of the company with a 'Neutral' rating.

San Francisco-based Zynga raised $1 billion with an initial public offering priced at $10 per share. It's the largest IPO from a U.S. internet company since Google went public in 2004 and raised $1.4 billion. Zynga's valuation is $7 billion.

While investors were apparently enthusiastic about the IPO, snapping up shares on the high-end of the expected range, analysts continue to express concern about the future of Zynga, as the company sails uncharted waters.

In a research note Friday, Cowen analyst Doug Creutz explained that, while Zynga has positioned itself well as the leading company in the Facebook gaming space, he has "significant concerns" regarding whether the company will be able to maintain its growth and justify the current valuation.

He noted that the company's Facebook DAUs count has slowed "dramatically" in recent months, and its share of the overall Facebook gaming DAUs count has dropped from 50 percent to 38 percent over the last year.

Elsewhere in the Cowen report, Creutz explains that Zynga's expenses have "exploded" over the last year, while its growth has decelerated dramatically in comparison. He also believes that "Zynga's culture may not be congruent with creativity," and that this may well impede the company's growth next year.

Earlier this week, analyst group Sterne Agee initiated its coverage of the company with an "Underperform" rating, noting that "Zynga's growth is slowing even faster than what is obvious at first."


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Comments


Todd Boyd
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The only people making money on all of these IPOs are the ass-hats working in the trading companies who get to buy the shares at the IPO price before it goes public.

William Anderson
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After reading about how Zynga is run I expect a big crash! There are just too many other start-up's in the pipeline just like Zynga and with them treating their employees like factory workers I expect many to take the money from the IPO and run for the hills! Expect many spin-offs from people exiting Zynga in 2012.

Russ Menapace
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http://www.google.com/finance?q=znga



Doesn't exactly seem to be catching fire....

Duong Nguyen
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Too many red flags for institutional and common investors imo, that would explain the tepid response. That and the recent tech IPOs habit of deflating right after.. most people will play the wait and see approach. Zynga probably wont raise the 1 billion dollars they were hoping for but I'm sure it will be significant amount, we'll see what they do with that money. Maybe they can double their revenue like they say but this is in the face of intense competition and declining DAUs.. They'll have a task before them.


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