Facebook gamemaker Zynga jumped into the stock market with a billion-dollar listing on Friday, seeing its stock price leap out of the gate and then drop below the opening price.
Offering 100 million shares -- one-seventh of the company's total -- at $10 a pop, the maker of Facebook games FarmVille, Mafia Wars and Words With Friends was valued at a whopping $7 billion.
In the first minutes of trade the shares were selling on the Nasdaq market at around $11 a share, a 10 percent premium, but Zynga stock ended the official trading day down five percent from its opening price.
It slide a bit further to $9.41 during after-hours trades.
"The trading of Zynga today highlights the difficulty of judging true demand for a hot IPO, and the extent to which the shares landed in the hands of flippers," said analyst Lou Kerner of institutional brokerage firm Liquidnet.Zynga's entrance is the largest Internet IPO offering since Google went public in 2004, surpassing online bargain service Groupon, which raised $700 million when it went public last month, only to see its stock price fluctuate wildly.
Despite concerns by some analysts that new Internet stars are being precariously overvalued, Zynga's stock was snapped up quickly.
Zynga offered only a small portion of the company's stock, about 14 percent, to the public.
Investors remain hungry for technology stocks and Zynga has shown it can make a profit, according to Virginie Lazes of investment bank Bryan, Garnier & Co.
Zynga games are free to play but the company makes money by selling virtual in-game goods to players and serving up advertising.
The games developer boasts around 230 million players per month in 175 countries, dwarfing its social gaming competitors, and reported cumulative revenue of $1.5 billion in its SEC filing.
Zynga said revenue soared nearly five-fold last year over the previous year to $597.4 million and it reported a net profit of $27.89 million.
For the first nine months of this year, Zynga reported revenue of $828.9 million, up from $401.7 million during the same period last year, and a net profit of $30.6 million.
The San Francisco startup is listed as "ZNGA" on the Nasdaq exchange.
Ahead of the listing Global Equities Research analyst Trip Chowdhry was bearish on Zynga's prospects, saying it was overvalued at $7 billion and that a more realistic figure would be between $2 billion and $2.5 billion.
"The valuation is very ahead of the fundamentals," Chowdhry said.
"What you're seeing today is its peak," he said. "There's only one way it can go and it's down."
Liquidnet had given Zynga an "underperform" rating before the opening bell, reasoning that the San Francisco firm's growth was slowing and its profit margins were under pressure.
"Another bear argument is that Zynga is overly dependent on the Facebook platform (94 percent of revenue is generated on Facebook)," Kerner said in a note to investors.
"A slowdown or disruption in the growth of Facebook, or Facebook policy changes, will negatively impact Zynga," he explained.
The social games arena in which Zynga is a champion is open to competition from rival startups as well as videogame titans such as Electronic Arts.
Bullish sentiment about Zynga, however, is backed by the company have a "first-mover" advantage in the market and being large enough to leverage its position onto of social networking platforms such as Google+ and Mixi.
Zynga is building a game-themed social network in a move that promises to reduce its dependence on Facebook.
Zynga last month provided a glimpse at "Project Z," an online community where people could play the social gaming star's globally popular titles without having to go to Facebook.