DealBook: Groupon’s Real Deals Trump Zynga’s Virtual Sheep

Zef Nikolla/NASDAQ, via Reuters and Brendan McDermid/ReutersMark Pincus, left, chief of Zynga, and Andrew Mason, chief of Groupon.

This holiday season, investors seem to prefer real deals to virtual sheep.

It’s been several weeks since Groupon and Zynga went public. Yet it’s striking how the two companies have performed in the marketplace since their initial public offerings.

Groupon shares have fallen 15.4 percent since spiking on their Nov. 4 debut. Yet at $22.10, they still remain above their $20 initial offer price. Zynga shares have tumbled 14.5 percent since beginning trading last week, and at $9.47 remain below their I.P.O. price of $10.

It is perhaps more surprising given the amount of trouble Groupon raised during its run-up to going public. There were the controversial accounting measures, the inopportune comments from its chairman, the much-debated letter from its chief executive and its revenue restatements.

By contrast, Zynga had to revise its revenue only once — which had the effect of improving its current numbers.

Even by looking at the performance numbers, Zynga appears to be doing a bit better. The company posted $597.5 million in revenue and $27.9 million in earnings last year, full stop.

As for Groupon? The math gets a bit more complicated:

• It posted $312.9 million in net revenue. Fair enough.
• But in terms of gross billings, which includes money that would eventually be paid to merchants, it reported $745.3 million.
• On a generally accepted accounting principles basis, Groupon recorded a $456.3 million loss.
• And using one of Groupon’s preferred accounting metrics, the company recorded a $181 million loss.

So why is Zynga’s stock underperforming?

There’s a technical possibility: the difference in the two companies’ floats. Zynga sold about 14 percent of its outstanding shares in its I.P.O. But Groupon sold an almost absurdly low 5 percent of its stock, creating significantly more scarcity for the coupon company’s shares.

Time will tell how each fares, especially when the lock-ups for insider stock sales expire. That could show what the people with the deepest knowledge of each company’s prospects — management — thinks of where each player is headed.

Article source: http://feeds.nytimes.com/click.phdo?i=9faaacc4349fec74f511e7d60f7ec3d2