Why tech needs more IPOs like Zynga's $1B offering

(Credit: Flickr user ToonariPost)

Zynga has finally put numbers to what it wants to raise in an IPO: anywhere from $.85 billion to $1.15 billion. That's 100 million shares at a range of $8.50 to $10 a share.

Before you conclude that this is just another manipulative march of the high tech financiers, take another look. In a number of ways, Zynga is breaking with startup-looking-to-go-public business as usual. The likely reason is the number of newly-public tech companies that have already seen their stock prices drop below IPO levels. Maybe it signals a new direction for tech IPOs, and that would be a good thing all around.

The teasing come-on
Investors--both the big institutions as well as individual consumers--are mad for tech stocks. Past history is the guide to this current performance. People hope to get in early on the next Google (GOOG) or Apple (AAPL). Or if not something that big, at least a stock that will jump some in price and let them take a profit.

Tech companies moving into the IPO phase have used that desire to their advantage. Many, including LinkedIn (LNKD) and Groupon (GRPN), use a tactic called a low-float IPO. They (under the insistent tutelage of their investment bankers) release a small amount of stock, knowing that scarcity will drive up share price, at least in the short run. If done right, inside investors get to sell off shares at a pretty profit, while those who hop on the bandwagon afterward can lose when share prices don't move up enough to let them get out.

And now for something completely differentYou can even get situations like Groupon, where mere weeks after going public, buyers' remorse set in and the stock fell below the IPO price. Even some recent good sales news that boosted the price still left it below the $20 IPO watermark. (It's worth noting that this phenomenon is not entirely limited to tech stocks -- savvy investors have long known that IPO shares are often a better value months, rather than hours, after the initial offering.)

Although at first rumors predicted that Zynga would go the low-flow route, the company's just-amended S-1 filing was a surprise. Not only would there be 100 million shares available -- 14.3 percent of all shares outstanding in the A, B, and C stock classes together -- but in the $8.50 to $10 range, it would have a lower initial price than other recent IPOs. (To be realistic, many tech IPOs increase in price in the last week or two if there's enough demand in evidence.) And the company is actually profitable.

Not all is kind looks and soft words. Because of the stock class structure, voting is heavily tilted to the insiders, and Zynga changed the way it recognized revenue last quarter, which made the latest round of black ink possible. But on the whole, it's a company that can make money and that has pulled back some from the frenzy to drive up short-term stock prices so insiders can get theirs and the heck with everyone else. It's exactly what tech startups need more of: Profits and long-range thinking that considers the investors, not just the founders and original VCs.

Related articles

• Zynga IPO could raise as much as $1.15 billion (aboutware.blogspot.com)

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Can you force someone to be your Facebook friend?

Some people are desperate to have friends.

Or, rather, they're desperate to feel as if they have friends. They therefore spend endless and painful hours on Facebook trawling, staring, begging, and waiting.

I find that a bottle of wine, a home-cooked spaghetti bolognese, and a credit card normally do the trick, but too many seem to discount such apparently painless methods.

For them, Brazilian security expert Nelson Novaes Neto has another answer: the foolproof, but perhaps somewhat dubious, route to guaranteed Facebook friendship.

Ars Technica was friendly enough to report that Neto is a man confident of his friending skills. Even when the object of his friendship neither knows him nor cares.

(Credit: Chris Matyszczyk/CNET)

He reportedly demonstrated his skills by securing the Facebook friendship of someone he called "SecGirl"-- who happens to be a Web security queen.

Neto said the first touchy-feely step toward his goal was to create a fake Facebook account. I know that this is supposed to be impossible. Alas, it appears not. The name on the account was one of his target's managers.

Next Neto says he did something frightfully modern. He sent out 432 friend requests. Of those, 24 were accepted within one hour.

You see how needy we all are? But here's how careless: 96 percent of those people were already a Facebook friend of that person. This, remember, was a mere clone. No one seemed to care.

Though clearly already confident of conquest, Neto wafted onto LinkedIn and made a few fake connections there.

Before lo could even introduce itself to behold, SecGirl accepted his Facebook friend request. The whole subterfuge took seven hours.

Please think of all the forlorn and resourceful 15-year-olds who might have already tried such a maneuver. Neto, however, explained subsequently to UOL Noticias that people just don't bother checking whether the friend request is from the real person or not.

They are so used to accepting requests and, some might say, they are so desperate to have more unreal friends.

Neto also pointed out that Facebook's "Three Trusted Friends" feature, which allows you to get help with password recovery, makes things even easier for the subterfuger.

Facebook, for its part, naturally told Ars Technica that Neto's actions were a clear breach of its policies.

But Facebook doesn't always employ the most alert police officers, seeming to be more concerned with the appearance of breasts than the appearance of something more threatening--such as, say, Holocaust denial groups.

The question is less whether Neto has revealed something that might be copied, but whether there is quite a bit of activity such as the sort he demonstrated already going on.

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