5 IPOs that Flopped

2. Zynga Inc. (NASDAQ: ZNGA)

Number of Hedge Fund Holders: 49  

Share Price on September 21: $7.64

IPO Price: $10 per share  

Zynga Inc. (NASDAQ:ZNGA) is a game developer that concentrates on marketing of social game services. It is ranked second on our list of 10 IPOs that flopped. The company went public in 2011 and priced the IPO at the top end of a proposed range of $8-$10. It was the biggest IPO since Google in 2004 and raised $1 billion for the firm. However, immediately after the IPO, the share price plunged, incrementally falling and has not recovered since. It is still trading below the IPO price. 

On May 6, investment advisory Bank of America upgraded Zynga Inc. (NASDAQ:ZNGA) stock to Buy from Neutral with a price target of $13.5. The shares of the social gaming company soared by 6% after the ratings update. 

At the end of the second quarter of 2021, 49 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Zynga Inc. (NASDAQ:ZNGA), up from 47 in the previous quarter worth $1.1 billion.

In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Zynga Inc. (NASDAQ: ZNGA) was one of them. Here is what the fund said:

“We also added to our position in Zynga. Our multiyear investment campaign in Zynga has been based on a new management team’s ability to drive steady growth in the company’s base portfolio of games, expand margins, reinvigorate the new game development pipeline and use its strong balance sheet to acquire complementary games and studios. Shares have been pressured in recent quarters, presumably because of investor concerns about the company’s moderating growth rate and Apple’s pending new privacy policy which will make it more difficult for Zynga to both efficiently acquire new players and sell advertising in its games. We believe the company has multiple growth levers it can pull in the periods ahead, including the rollout of new games, acquisitions, further penetration into international markets and entry into new gaming categories, to name a few. Furthermore, our research suggests the Apple privacy policy change is manageable for larger mobile game developers such as Zynga. Given our strong conviction in the profit cycle, we used recent weakness to add to our position.”