The darlings of Silicon Valley haven’t been doing so well. Fresh after Apple released its disappointing quarterly results, shares in social gaming company Zynga have plummeted 40% after it reported a net loss of $US108 million.
The release raises questions about how the new wave of listed tech companies is faring a year or so after they began, along with group buying giant Groupon.
The consensus? Not very well.
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Zynga said yesterday it would reduce its forecast for full year earnings to between just four and nine cents per share, compared to 23-29 cents. The company originally listed at $US10 and is now trading at around $US3.
Of course, Facebook shares took a small hit, considering the company accounts for 15% of its profits.
And what is Zynga blaming? For one thing, the $US200 million acquisition of the app Draw Something has been referenced, with the company saying it has “reduced expectations” for the game. Analysts warned at the time that the price was based on temporary fixation rather than long-term value.
Zynga chief Mark Pincus also blamed delays for new games, and “short-term challenges which led to a sequential decline in bookings”.
It’s a fall from grace for Zynga, which became a billion-dollar company leveraging Facebook’s success. Things haven’t always been so bad – Zynga has turned a profit before. But the disappointing results and the subsequent reaction highlight what some investors have feared – that tech companies have been overvalued.
And when compared side by side, it certainly looks as though tech companies aren’t doing so well. Let’s take a look at some of the biggest tech floats of the past year, and see how they’re faring:
Streaming music site Pandora listed back in June 2011 and was valued at $US3 billion after raising $US290 million. The opening price was set at $US16 and quickly soared to $US26 in first-day trading.
But now? Pandora shares are down 29%, trading at just $US9.44. During the same period, the Dow Jones has risen over 5%. Not a good sign.
This social network is by far the most successful tech company to have floated in the past 18 months.
After listing at a starting price of $US45, the company hit $US121 during first day trading and stopped at $US105. During the day its market cap soared to $US8.9 billion, making its founder Reid Hoffman a billionaire. It raised the company $US400 million.
As for now? LinkedIn is sitting pretty at $US102. While that’s not quite reaching the highs of its first day, it represents a 97% increase overall. And during the year to date shares have risen a cool 62%.
As far as Silicon Valley listings go, LinkedIn has everything going for it.
The daily deals darling is perhaps the worst-performing tech company to have listed.
It hit the NASDAQ back in November, at a price of $US20. It quickly rose as high as $US31 in the first day, closing at $US26, representing a rise of 30%. Overall, the business was valued at $US12.7 billion. It was an early win for the company, which had rejected a $US6 billion offer from Google.
The fears over Groupon’s success have been repeated often – unhappy merchants, a business model that appeals to a broad demographic, and the lack of any profit.
Those fears have proved to be correct. Since it listed, Groupon shares have plummeted 72% and in 2012 alone shares have fallen 66%. Some of that came after it released some updated accounting figures.
Much of that has been in the past month, after Groupon’s initial public offering lock-up period expired, allowing outstanding shares to be traded.
Online reviews site Yelp is yet another company that managed to score a positive opening day. Shares were set at $US15, and they quickly rose 70% to $US26 before closing at $US24.58. A healthy start to the company, considering it only made a net loss of $US17 million in the year prior.
But since its March listing, Yelp hasn’t done too well. Shares are down 12.5% against a 2.3% drop in the Dow Jones.
It’s certainly not horrible, but definitely not great, either.
Perhaps the most disappointing of them all; Facebook listed in May after years of speculation, setting prices at $US38.
But a day into trading, the price had risen just 23 cents, despite gaining as much as 18% during the first day. While there was a disappointing performance on the stock market in general that day, and a NASDAQ glitch that stopped some traders, the message was clear – demand wasn’t there.
Maybe it’s because the price was too high. But one thing’s for sure – since its listing, Facebook shares are down 22.79%.