Zynga, the social games company behind the famous FarmVille, CityVille and Mafi Wars, is seeking to raise close to $1billion by selling off shares in its initial public offering, according to Reuters, as per the company’s filing with the SEC on Friday morning.
For some, this would be a first chance to ride the ‘facebook growth’ wave; since Zynga’s primary community is based on their Facebook games. It is reported that Zynga hopes to sell a 100 million shares between $8.50 – $10; this could get the company to between $850million to $1 billion, setting the shareholders up with 14.3% of the company.
This pitches the company lower than the initial evaluation that was rumoured a while ago, at $9.04 billion. This valuation can be attributed to the tough times seem by some other companies recently when their stock prices have fallen below the IPO. Yet, for the company and its CEO Mark Pincus, who will still hold on to all of his shares, it should be moment to rejoice!
Mark Pincus founded Zynga back in 2007 and is currently reported to be employing close to 2300 people. As of November 2011, Zynga’s games on Facebook are reported to have approximately over 250million monthly active users between nearly 15 games including these famous names Farmville, Mafia Wars, CityVille and Mafia Wars2. It also offers mobile versions of most of these games, while adding a few others on the mobile platform.
Zynga’s IPO follows this year’s Groupon, LinkedIn and Pandora IPOs. In its category, Activision Blizzard Inc is currently the industry’s largest at $14.2billion followed by Electronic Arts Inc at $7.7billion. This IPO will not only add Zynga to the list of 2011 Internet IPO’s, but also perhaps displace Electronic Arts Inc, which has been making and selling a large portfolio of games for a while.
Some however are still sceptical of the scenario. If it is perhaps not the overall uncertainty surrounding the internet companies’ stocks over the last few weeks, then it is the growth or revenue concerns of Zynga itself. Zynga currently draws its revenues from a mix of virtual goods sales in the games to advertising sales.
Analysts are concerned with the heavy reliance Zynga has on Facebook, as nearly 30% of company’s revenue are generated through Zynga. Furthermore, there are concerns that any fluctuation in the growth of Facebook users will impact Zynga as well.
However you chose to play this game with Zynga, it will not only be crucial for the company but will perhaps also weigh on Facebook’s IPO expected in 2012. Afterall, Zynga is a major contributor to Facebook’s revenue being the largest gaming company on Facebook.
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