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Finance

Zynga stock plunges, trading halted

Zynga stock plunges, trading halted

Fri 18 May 2012 5:00pm GMT / 1:00pm EDT / 10:00am PDT
BusinessOnlineFinanceFinancial

Facebook's IPO started today, and Zynga's stock dropped over 13%

Trading has been halted in Zynga's stock after a 13.3 percent drop to $7.17 a share following Facebook's IPO. Trading restarted briefly, and the stock bounced back to $7.80 a share, but has been halted again. Speculation has been that perhaps the drop was due to Facebook's stock not popping up once selling began (though now it's up over 8 percent from the opening price), or that Zynga shareholders were dumping the stock to get into Facebook shares.

Other companies related to social networking also saw their shares fall; LinkedIn dropped 2 percent, Yelp was off by 8 percent, and China's Renren ("the Facebook of China") dropped over 10 percent.

Michael Pachter, analyst at Wedbush Securities, told GamesIndustry International that the drop in Zynga stock was due to a technical problem at the stock market. "Yes, someone made a mistake," Pachter said. We are continuing to follow the story and will update it later today.

Update: Trading in Zynga stock restarted after the automatic halt, and finished the day at $7.16 per share, a drop of 13.4 percent. At one point today the stock hit $6.40 per share, the lowest level in its brief history.

2 Comments

Gary McHale
Studying Computer Science and Artificial Intelligence

5 0 0.0
When you launch a new issue the underwriter has a lot of shares on their book. The lead underwriter cannot sell its stake, as it would incurr massive book losses. The other underwriters also have a problem, they cannot be seen to be selling their own holdings as it gives the impression that they have no placement power, and run the risk of not being invited into future issues. So, what they do to hedge their exposure is to sell a stock that is correlated to the one that they are underwriting as a hedge. In this case Zygna. If Facebook shares go down in price you would also expect this to affect the Zygna price. In which case you have a hedge for your Facebook holdings without needing to sell them outright.

Edited 1 times. Last edit by Gary McHale on 20th May 2012 12:06am

Posted:2 years ago

#1

Frederic Eichinger
Web Developer

33 27 0.8
Only reason Facebook was kept on IPO price was the banks' backing, so, it's not really surprising that Zynga dropped that far.

Posted:2 years ago

#2

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