Zynga Aims for $10 Billion With Upcoming IPO

Zynga Inc., the largest game developer for Facebook, is preparing for an initial public offering (IPO) this month.
Zynga Aims for $10 Billion With Upcoming IPO
12/1/2011
Updated:
12/4/2011
<a href="https://www.theepochtimes.com/assets/uploads/2015/07/zynga_118608807.jpg" rel="attachment wp-att-151879"><img class="size-medium wp-image-151879" title="Mark Pincus, CEO and co-founder of Zynga" src="https://www.theepochtimes.com/assets/uploads/2015/07/zynga_118608807-319x450.jpg" alt="" width="350" height="262"/></a>

Zynga Inc., the largest game developer for Facebook, is preparing for an initial public offering (IPO) this month, looking to raise almost $1 billion from new investors.

The San Francisco-based social gaming company is seeking to raise approximately $900 million in capital by selling 10 percent of its shares, which will be valued between $8 and $10 per share.

Zynga became widely known for creating the popular Facebook games “Farmville” and “Cityville,” which are free to play. The company’s revenues come from advertising and selling in-game add-ons, such as farms and weapons within the game for a small fee. It has more than 220 million users.

Although Facebook takes 30 percent of any revenues Zynga makes from its Facebook games, Zynga has been profitable, which is rare among Silicon Valley firms seeking an IPO.

According to a recent filing with the SEC, Zynga reported net income of $30.7 million in the nine months that ended Sept. 30. Last year, Zynga earned $90.6 million in profits. But some analysts have warned that Zynga may be too reliant upon Facebook, a platform that generates an overwhelming majority of its revenues. In its SEC filing, Zynga warned, “If Facebook loses its market position or otherwise falls out of favor with Internet users, we would need to identify alternative channels for marketing, promoting, and distributing our games, which would consume substantial resources and may not be effective.”

A Reuters report, citing anonymous insider sources, says that the company is aiming for total valuation of $10 billion for the company, which is lower than the originally anticipated valuation of up to $20 billion. In an amended filing with the Securities and Exchange Commission, Zynga said that a third party had valued the company at $14.2 billion.

Reasons for the revision in valuation may be macroeconomic, as the continued European sovereign debt crisis has sapped investor appetite for equities.

Another reason may be relatively poor performance of recent technology IPOs. After an initial surge in stock price from daily deal website Groupon’s IPO, it has lost almost 40 percent of its value since.

Controversial Corporate Culture

Zynga has been mired in its share of controversy lately due to reports that it is a tough and intense place to work.

According to a recent New York Times report, employees have been harsh in their assessment of the company in its internal quarterly employee survey, with at least one employee saying that he will cash in his shares from the IPO and leave the company.

Like all companies, Zynga regularly assesses employee performance. But according to the report, which interviewed several former employees, Zynga workers have long hours and are held to exceptionally high performance standards due to its meritocratic culture.

Perhaps more damning is a report from the Wall Street Journal last month alleging that Zynga CEO Mark Pincus felt that some employees owned a disproportionally high number of company shares and told them to give back the shares or risk termination.

No matter how it is perceived internally or externally, Zynga is set to go public by the end of the year, with Dec. 16 the most cited date of trading. It will serve as a good gauge for one of the most anticipated IPOs of all time—that of social-networking site Facebook Inc. Facebook is rumored to be filing its IPO next year, with a valuation of as much as $100 billion.

Goldman Sachs and Morgan Stanley are the joint book runners for Zynga’s IPO. JPMorgan, Barclays Capital, Bank of America, and Allen & Company are syndicate bankers.