Facebook Filing Lifts Zynga, Other Recent IPOs

Published February 2, 2012 8:27PM (EST)

LOS ANGELES (AP) — Facebook's long-awaited IPO filing lifted shares of freshly minted public Internet companies, including recent laggards Zynga and Groupon. But analysts said the halo effect might fade, because some companies basking in Facebook's glow just aren't as financially sound as the world's largest social network.

Zynga Inc. was getting the best ride on Facebook's coattails Thursday. In afternoon trading its shares jumped more than 15 percent — for good reason. Almost all of Zynga's revenue comes from addictive games like CityVille and Mafia Wars that are played on Facebook. The social network's initial public offering filing revealed that 12 percent of its $3.7 billion in revenue last year came from Zynga.

Some of that revenue came from the 30 percent "toll" that Facebook takes on in-game purchases, the rest came from ads that Zynga bought on the site.

"It shows (Zynga's) an important partner, they're going to participate in Facebook's growth," said Wedbush analyst Michael Pachter.

Baird analyst Colin Sebastian said the filing suggests there could be upside to his forecast for Zynga's fourth-quarter earnings, which it will announce in two weeks.

He added that other Internet companies were justifiably trading higher partly because Facebook reported ad revenue growth of 69 percent in 2011.

"It shines a spotlight on the Internet sector," Sebastian said. "There's a lot to be excited about still among Internet stocks."

Daily deals site Groupon Inc. shares rose 7.8 percent to $23.16, while jobs networking site LinkedIn Corp. shares rose 5.7 percent to $76.46, even though their revenues aren't tied to Facebook.

Online radio service Pandora Media Inc. shares rose 3.2 percent to $13.30 and American depositary shares of Chinese social networking company Renren Inc. jumped 42 cents, or 8.4 percent, to $5.43.

All five companies made their stock market debuts last year. Only LinkedIn's shares have traded consistently above their IPO price.

Maxim Group analyst Echo He said Renren is benefiting partly because it is one of the few Chinese Internet stocks that trades in the U.S. Even with Thursday's 10 percent bump, the shares are less than half of the IPO price of $14 set last May.

Renren has less than 5 percent of Facebook's 845 million-strong user base, isn't growing as fast, lacks market dominance in China, and may barely be profitable this year, compared to Facebook's hefty 27 percent net income margin, she said.

Investors "think maybe this name could get some benefit," He said. "It probably won't last long."

By Salon Staff

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