Zynga files for $1 billion IPO

As predicted, Zynga plans on becoming public, hoping to raise $1 billion in an IPO.

July 1, 2011 11:15 AM

As predicted, Zynga plans on becoming public, hoping to raise $1 billion in an IPO. The company issued an S-1 filing today, revealing some key facts about the company. While the $1 billion IPO will give the company a $10 billion valuation, Zynga has only made $90 million of profit in 2010. However, as VentureBeat notes, "Zynga is by far the most profitable company to file to go public this year," besting well-known names like Groupon, Pandora, and LinkedIn. Most of that profit has come from the sale of virtual goods, which represented $575 million of revenue in 2010. According to the filing, Zynga currently has 60 million users that play on a daily basis, and over 230 million monthly active users across all its games. Charts provided by the company show that there is reason to believe that the company will continue to grow at its extremely fast pace:

Zynga's growth over three years has been tremendous

"By offering our shares to the public we hope to enable Zynga to invest more in play than any company in history," Mark Pincus, CEO and Founder of Zynga, explains in the filing. "To accomplish this, we will continue to make big investments in servers, data centers and other infrastructure so players’ farms, cities, islands, airplanes, triple words and empires can be available on all their devices in an instant." The biggest threat to Zynga's growth, however, is its relationship with Facebook which has sometimes been on shaky ground. The filing reveals how vital support from the social networks is. According to the filing--"Our business would be harmed if:

Facebook modifies its terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers, or Facebook changes how the personal information of its users is made available to application developers on the Facebook platform or shared by users;
Facebook establishes more favorable relationships with one or more of our competitors; or
Facebook develops its own competitive offerings."

Even Google's foray into the social networking scene with Google+ can adversely affect Zynga's bottom-line, as it has the potential to usurp Facebook's dominance in the market. "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." Undoubtedly, many investors will question if it is wise to invest in a company whose profit margin is determined entirely by a separate private entity.

Andrew Yoon

Andrew Yoon was previously a games journalist creating content at Shacknews.

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Zynga
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July 1, 2011 11:15 AM

Andrew Yoon posted a new article, Zynga files for $1 billion IPO.

As predicted, Zynga plans on becoming public, hoping to raise $1 billion in an IPO.
- [deleted] 608864368
  
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  July 1, 2011 12:06 PM
  
  [deleted]
- pancake humper
  
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  July 1, 2011 12:53 PM
  
  Buying the shit out of this stock
  - drucifer
    
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    July 1, 2011 12:53 PM
    
    BUYZYNGA!
  - hamachi
    
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    July 1, 2011 1:29 PM
    
    :)
- Dr_Cube
  
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  July 1, 2011 5:01 PM
  
  How much does EA cost to buy?
- filthysock
  
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  July 1, 2011 5:04 PM
  
  hangon, groupon makes less than 90m a year? I thought they were pulling in billions?
  - lordmedikit
    
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    July 1, 2011 5:13 PM
    
    No all these companies get valued at far greater than what they are actually making. Apparently this is sound economics and then everyone acts surprised when we collectively discover things aren't as valuable as their stock prices would suggest and the market crashes. Repeat ad infinitum.
    - lord cecil
      
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      July 1, 2011 5:30 PM
      
      If a company's valuation were equal to their profit then why would the company ever sell itself? It would be better to just pocket their profit year over year.
      - filthysock
        
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        July 1, 2011 5:33 PM
        
        for normal companies its 7x the profit, for newer companies it can be as high as 20x i think. For .com shit, tuck it, go to 100x.
  - Chod
    
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    July 1, 2011 5:24 PM
    
    Groupon hasn't made a profit yet.
    - RikiTiki2
      
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      July 1, 2011 5:25 PM
      
      he could be citing revenues
      - derelict515
        
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        July 1, 2011 5:53 PM
        
        their revenue is far above 90mil
    - filthysock
      
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      July 1, 2011 5:25 PM
      
      what?! Hahahaha, their refusal of google's buyout offer is much more hilarious now.
- sammyl
  
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  July 1, 2011 5:20 PM
  
  I scanned the article but didn't see it mentioned - do we know the date of the IPO?