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Facebook Shares Drop Below $30, Zynga and LinkedIn Join the Plunge

Social networking giants continue their downward spiral
By: David Shear
Published: May 29th, 2012 in Business » World

The Facebook plunge is being felt across the industry as rival LinkedIn and mate, Zynga have been on the wrong end of the Facebook IPO aftermath.

Facebook (FB) fell to an all-time low of $29.11 at time of writing, down from their May 18 debut at $38 and their all-time high of $45.00, as investors are getting more concerned over proper valuation and lawsuits.

Zynga (ZNGA), the social game developer whose majority of revenue are generated through Facebook, and who is also one of Facebook’s largest third-party revenue generators, has seen its stock dive to $6.09 a share today, down from their debut of $10 a share in December and an all-time high of $15.91 a share. Today also marked the end of the lockup period for Zynga employees, allowing them to sell their stock which they had been forced to hold since the company went public. Employees are now able to sell an estimated 325 million shares, which isn’t helping the downward spiral of the stock. By noon Tuesday nearly 30 million shares had been traded, more than 50% higher than Zynga’s daily trading volume average.

LinkedIn , however, has written a different story so far but the ending looks to be similar. The stock was issued at $45 and went as high as $122.70 before settling at $94.25 on its May, 2011 debut. For early investors, they have still seen great returns, more than doubling their investment, but since then the stock has hit a low of $60 to bounce back to $113.49 a share and then drop a couple of days before Facebook’s debut, to $99.06 as of time of writing. Facebook’s anticipated debut seemed to have caused many investors to abandon the LinkedIn ship to try and get in the Facebook game. Unfortunate decision.

So which of the three Jewish Founded high-tech darlings are a better investment going forward? LinkedIn has a smaller public float, as compared to Facebook which had sold a larger portion of their company in the offering. This small float creates value for LinkedIn’s shareholders, but this value is still imaginary and disproportionately higher than it should be. LinkedIn, with much smaller profit margins than Facebook, trades at 671 times earnings, while Facebook is trading for 75 times profit, which is still exceedingly high. Zynga stock is at an all time low and more so than any other high-tech stock, will rise and fall with Facebook.

So the answer is: None. Facebook will continue its fall to a number that is far more realistic, around $16-18 a share. Zynga will continue to be the unfortunate victim of Facebook’s future, and LinkedIn is currently trading at a valuation which is ridiculous and will also continue to drop as investors realize there is nothing sexy about investing in over-priced high-tech stocks.

Related articles: Facebook, LinkedIn, Zynga, IPO, Reid Hoffman, Mark Zuckerberg, Mark Pincus
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