Shares of social-networking gamemaker Zynga fell as much as 4 percent in after-hours trading last night after it reported an $85.4 million loss in the first quarter compared to a $16.8 million profit in the year-ago period.
The sell-off, which came despite the company raising its bookings forecast, is the latest example of investor unease over Zynga as well as two other one-time tech darlings — Pandora and Groupon.
The three companies — each of which went public in the past year — have traded recently below their initial public offering price.
It wasn’t supposed to be this way. The IPO waters were supposed to be smoothed for Facebook, slated to go public next month.
Pandora, Zynga and Groupon were expected to wow.
”There is some Facebook skepticism for the first time from IPO investors, mostly big mutual funds, having gotten burned badly on buying into the offerings of Pandora, Zynga and Groupon,” said Sam Hamadeh, CEO of PrivCo, a research firm.
The list of burn victims is long with funds such as Vanguard, Vantagepoint Investment Partners, Transamerica and others, who jumped into the stocks on Day One only to see the investments struggle.
Groupon, which priced at $20 when it went public in November, closed yesterday at $11.92. Zynga was priced at $10 in December and closed at $9.42 last night.
Pandora, which priced at $16 in June, closed yesterday at $8.57.
Facebook has been considered a blue-chip company compared to its tech brethren, and the investor interest in the social networking giant was supposed to lift the rest, as it did LinkedIn, which had a prosperous IPO, launching at $45 and now trading above $100.
“The question now is have the other companies dirtied the water for Facebook,” asked analyst Ken Sena with Evercore Partners.
Sena said Facebook CEO Mark Zuckerberg’s social network deserves special consideration along with companies that represent “true platforms.”
“Some of these companies are platforms and have tremendous commercial ability and other are not platforms,” Sena said.
Still, valuation matters for IPO investors, who don’t want to hold shares that are worth less a week after they were purchased.
Facebook has traded above $100 billion in value on secondary markets, and the private valuations put pressure on bankers to meet those prices on the public market, analysts said.
At that value, Facebook trades at 25 times its revenue, lofty compared to Google, which went public in August 2004 at 8 times revenue and a $38 billion value.
Social media watcher Lou Kerner said Facebook’s IPO represents a divide between old guard and the new tech community. ”The world’s never seen an IPO with as much global demand outside of Wall Street as there exists for Facebook,” Kerner said. “It can have a highly successful offering even if traditional, institutional investors are tepid.”