Why Did Zynga Tank After Facebook IPOed? • Hacker News Board

Re: Why Did Zynga Tank After Facebook IPOed?

#31

Post by obiterdictum » Sat, May 19, 2012, 10:55 AM UTC

hristov wrote: post #8

The reason is obvious to me. In fact it is so obvious now that I am kicking myself for not finding a way to make money out of it. It is related to the reasoning proferred by the Atlantic, but it is not exactly it. It is true that Zynga and facebook are very related. And for that reason, it seems to me that a lot of Zynga shareholders were holding Zynga shares not because they want to own Zynga, but because they want…

The reason Facebook went down is the usual immediate post IPO sell-off when a bunch of people that got into the IPO sell their shares immediately to make some quick profit.

Is this one correct, though? I recall that insiders have selling restrictions for 180 days after the IPO date.

Re: Why Did Zynga Tank After Facebook IPOed?

#32

Post by jonnathanson » Sat, May 19, 2012, 1:04 PM UTC

obiterdictum wrote: post #31

hristov wrote: post #8

The reason is obvious to me. In fact it is so obvious now that I am kicking myself for not finding a way to make money out of it. It is related to the reasoning proferred by the Atlantic, but it is not exactly it. It is true that Zynga and facebook are very related. And for that reason, it seems to me that a lot of Zynga shareholders were holding Zynga shares not because they want to own Zynga, but because they want…

The reason Facebook went down is the usual immediate post IPO sell-off when a bunch of people that got into the IPO sell their shares immediately to make some quick profit. Is this one correct, though? I recall that insiders have selling restrictions for 180 days after the IPO date.

Lock-up periods only apply to those holding a majority of stock (i.e., Zuckerberg), or to insiders who held a significant portion of stock prior to the filing of the IPO. Company employees typically fall into this category, too, even if their holdings aren't enormous, because they're insiders.

The lock-up doesn't necessarily apply to people who got in at the IPO, such as during the roadshow period. Also pretty sure the lock-up doesn't apply to people who bought private shares in secondary markets, such as the Goldman clients who bought in when Goldman offered private stock about 6 months ago.

Re: Why Did Zynga Tank After Facebook IPOed?

#33

Post by n2dasun » Sat, May 19, 2012, 2:03 PM UTC

samwilliams wrote: post #18

hristov wrote: post #8

The reason is obvious to me. In fact it is so obvious now that I am kicking myself for not finding a way to make money out of it. It is related to the reasoning proferred by the Atlantic, but it is not exactly it. It is true that Zynga and facebook are very related. And for that reason, it seems to me that a lot of Zynga shareholders were holding Zynga shares not because they want to own Zynga, but because they want…

While this is a nice theory in principle, I think it falls down because of the timing of the ZNGA drop. The drop happened exactly when the FB shares were made available to trade (11.30 - 11.38), before this time they had been trading fine (in big volumes). You would expect the people that were holding these shares as a proxy for FB to have anticipated that others like them would have wanted to sell that morning and d…

I think hristov's theory holds up just fine. I think the initial drop was short sales by people anticipating that exact situation.

Re: Why Did Zynga Tank After Facebook IPOed?

#34

Post by n2dasun » Sat, May 19, 2012, 2:03 PM UTC

samwilliams wrote: post #18

hristov wrote: post #8

The reason is obvious to me. In fact it is so obvious now that I am kicking myself for not finding a way to make money out of it. It is related to the reasoning proferred by the Atlantic, but it is not exactly it. It is true that Zynga and facebook are very related. And for that reason, it seems to me that a lot of Zynga shareholders were holding Zynga shares not because they want to own Zynga, but because they want…

While this is a nice theory in principle, I think it falls down because of the timing of the ZNGA drop. The drop happened exactly when the FB shares were made available to trade (11.30 - 11.38), before this time they had been trading fine (in big volumes). You would expect the people that were holding these shares as a proxy for FB to have anticipated that others like them would have wanted to sell that morning and d…

I think hristov's theory holds up just fine. I think the initial drop was short sales by people anticipating that exact situation.

Re: Why Did Zynga Tank After Facebook IPOed?

#35

Post by samwilliams » Sat, May 19, 2012, 2:40 PM UTC

ArchD wrote: post #22

samwilliams wrote: post #18

Earlier quoted context omitted.

While this is a nice theory in principle, I think it falls down because of the timing of the ZNGA drop. The drop happened exactly when the FB shares were made available to trade (11.30 - 11.38), before this time they had been trading fine (in big volumes). You would expect the people that were holding these shares as a proxy for FB to have anticipated that others like them would have wanted to sell that morning and d…

If you were an ZNGA owner who's also interested in FB, you won't necessarily sell ZNGA before actually buying FB, because you don't actually know that you can get FB at a price acceptable to you until trading opens. In other words, human beings could contribute to the ZNGA price, not just trading algorithms.

Good point. But if you were a ZNGA owner who wanted to buy FB at a lower price than the expected one, you would know that as soon as the FB price was lower than expected, the ZNGA stock would slide (as everyone was using it as a proxy). Subsequently, unless you sold within 2 minutes of the FB price being known, it wouldn't be a good strategy (as you would end up loosing money on the ZNGA sell).

That said, as long as you acted fast enough, that strategy was win-win. Either FB stock was too high and ZNGA rose too, or FB was affordable and you could quickly change to that, before ZNGA fell.

Re: Why Did Zynga Tank After Facebook IPOed?

#36

Post by jbrough » Sat, May 19, 2012, 3:28 PM UTC

jonnathanson wrote: post #32

obiterdictum wrote: post #31

Earlier quoted context omitted.

The reason Facebook went down is the usual immediate post IPO sell-off when a bunch of people that got into the IPO sell their shares immediately to make some quick profit. Is this one correct, though? I recall that insiders have selling restrictions for 180 days after the IPO date.

Lock-up periods only apply to those holding a majority of stock (i.e., Zuckerberg), or to insiders who held a significant portion of stock prior to the filing of the IPO. Company employees typically fall into this category, too, even if their holdings aren't enormous, because they're insiders. The lock-up doesn't necessarily apply to people who got in at the IPO, such as during the roadshow period. Also pretty sure t…

I was an engineer at HomeAway during last year's IPO, and all employees were under a 6-month lockup period (during which time you can not sell stock, or enter into any sort of agreement with a third party regarding stock options).

As an employee, therefore, the IPO event itself is not too significant. Unless you have $1 options (or already own stock at a very favourable price), you can't bank on a return due to the uncertainty of the lockup period. Also, the end of the lockup period itself (although completely anticipated by the market) will likely be unfavourable for the stock price as selling employees introduce more supply.

Re: Why Did Zynga Tank After Facebook IPOed?

#37

Post by dbkbali » Sun, May 20, 2012, 12:21 AM UTC

tatsuke95 wrote: post #12

dbkbali wrote: post #5

There is another possibility and that is dealers were desperately trying to maintain facebooks price above the Ipo price, especially given the significant lower fees taken on this Ipo and the greenshoe option. Without this dealer intervention it is possible facebooks price would have correlated more with zynga's price short. The greenshoe option http://en.wikipedia.org/wiki/Greenshoe could also have something to do w…

This isn't a "possibility", it's the duty of the underwriter.

The underwriter has no legal obligation or "duty" to guarantee or support the original issue price. Definitely, they have an economic and business incentive to ensure the price stays above the issue price. Failure to keep the IPO above this price could lead to a loss of credibility with their large institutional buyers and also with the issuer and their participation in future IPOs.

Re: Why Did Zynga Tank After Facebook IPOed?

#38

Post by Nick_C » Sun, May 20, 2012, 2:10 AM UTC

jbrough wrote: post #36

jonnathanson wrote: post #32

Earlier quoted context omitted.

Lock-up periods only apply to those holding a majority of stock (i.e., Zuckerberg), or to insiders who held a significant portion of stock prior to the filing of the IPO. Company employees typically fall into this category, too, even if their holdings aren't enormous, because they're insiders. The lock-up doesn't necessarily apply to people who got in at the IPO, such as during the roadshow period. Also pretty sure t…

I was an engineer at HomeAway during last year's IPO, and all employees were under a 6-month lockup period (during which time you can not sell stock, or enter into any sort of agreement with a third party regarding stock options). As an employee, therefore, the IPO event itself is not too significant. Unless you have $1 options (or already own stock at a very favourable price), you can't bank on a return due to the u…

Are you allowed to sell the market (S&P say, using a 6 months futures contract) so that your only exposure is to the Homeway-S&P differential, not to the market in general?