????Several months ago, things were looking very good indeed for Zynga. The casual-gaming company stood apart from other web IPOs of 2011 thanks to its "bountiful" profits. Investors were "excited" by an offering that could value the company at $20 billion.
????Now that Zynga (ZNGA) has gone public, things are looking much different. The stock debuted Friday at $10 a share, valuing the company at a relatively modest $7 billion. After popping above $11 a share for a few promising moments, the stock quickly sunk to $9.50 Friday and fell as low as $8.75 Monday. At that low point, Zynga's market value was $6.1 billion, a bit below LinkedIn's (LNKD) $6.3 billion market cap -- even though Zynga's revenue over the last 12 months was twice as large as LinkedIn's. Zynga's market value was also less than half that of Groupon (GRPN).
????Just as quickly, Zynga went from IPO hero to dog, with stories describing how its "dud" offering "fizzled." Much of that analysis overlooked a crucial detail that says less about Zynga's financials than it does about the backroom culture of IPO deals. Zynga always wanted to raise $1 billion in this offering. But to do that, as Reuters pointed out, it chose to forego the 15% discount that underwriters often give to IPO investors, a discount that virtually guarantees that first-day pop.
????Despite the volatility inherent in newly-listed stocks, there's a tendency to rate IPOs in a thumbs-up, thumbs-down manner, based on whether their stocks are above or below their respective offering prices. But a closer look at Zynga shows things are more complex than that. Yes, the market is right to question whether Zynga is fairly valued at its offering price. But Zynga may not be as bad off as some critics are suggesting -- and it may well be in much better shape than other web stocks that have gone public this year.
????Take, for example, the claim that Zynga's debut was a dud. That's seems true enough if you compare it to the first day performances of other web IPOs like Pandora (P) (up 9% on its first day), Groupon (up 31%) and LinkedIn (up 109%). But these companies launched with much smaller floats, offering between 5% and 9% of their total shares. Zynga offered a larger float, about 14% of its common stock.
