Zynga’s $10 IPO: Shares Decline to $9.50 on First Day

Shares of Zynga, the online gaming developer linked to Facebook, closed at $9.50 Friday, 50 cents below their initial public offering price Thursday after the company raised $1 billion in the biggest IPO since Google.

While Zynga shares rose as high as $11.50 shortly after they opened in midmorning, they fell sharply afterwards before staging a slight recovery before the market closed. About 116 million shares were traded.

San Francisco-based Zynga sold about 14 percent of its shares, so the company ended its first day as a public entity valued around $7 billion, about half its self-evaluation a few months ago.

That's still about $300 million more than games pioneer Electronic Arts, the Redwood City, Calif.-based developer of EA Interactive and EA Sports games. In Japan, game maker Nexon this week raised $1.2 billion in its IPO, the biggest in Japan for 2011. The company's value is the equivalent of $6 billion, based on Friday's Tokyo close.

The decline in Zynga's widely anticipated IPO price didn't help the overall market, either. The S&P 500 Index rose 3.06 points to 1,128.81, the Dow Industrials fell 2.57 points to 11,866.20 and the Nasdaq rose 14.32 to 2,555.33.

Zynga's underwriters were Morgan Stanley and Goldman Sachs, experienced IPO bankers. Goldman is a major shareholder of Facebook, where most of Zynga's games are played. Zynga CEO Mark Pincus, 45, is also a Facebook shareholder.

The underwriters had suggested Zynga shares could be priced between $8 and $10 after a road show last week by Pincus.

Zynga, in its final IPO documents, reported nine-month profit of $30.2 million on revenue of $828.9 million as well as 6.7 million paying customers as of Sept. 30.

On Monday, enterprise social networker Jive Software, with the same underwriters, priced its IPO at $12, raising $160 million. The shares surged 26 percent at first and closed Friday at $15.10, valuing the Palo Alto, Calif.-based company at $892 million.

Looking into 2012, Zynga's IPO might be an indicator of market response for Facebook, which has said it already has 800 million users. While the San Francisco-based social networking giant has been mum, by law it will have to file financial information with the U.S. Securities and Exchange Commission regarding its first quarter performance.

Google raised $1.9 billion in 2004, the largest technology IPO.