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Zynga Seeks $1 Billion In IPO 93

Posted by Soulskill
from the that's-a-lot-of-farmville dept.
bizwriter writes "Zynga finally filed its IPO paperwork today, as it wants to raise $1 billion. And while the reports of how well it did were significantly overstated, this is a company that still makes significant revenue and profit. If you thought that LinkedIn's IPO was hyped and hyper, Zynga's going to put that all to shame."
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Zynga Seeks $1 Billion In IPO

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  • If you thought that LinkedIn's IPO was hyped and hyper, Zynga's going to put that all to shame.

    Okay so let's take a look at the two IPOs. From Slashdot's own summary of LinkedIn's IPO we have this fact about what the shares were trading at on LinkedIn's opening day:

    That price values the company at over 30 times its 2010 revenue ...

    So now that we can see Zynga's financials, we see that its revenues for 2010 were $600 million [seekingalpha.com] meaning that if the shares hold at exactly the price Zynga opens at, they will be valuing Zynga at 1 2/3 times their 2010 revenues. Now, of course, last year's revenue doesn't mean everything as growth, market cap, etc come into play. But that 1 2/3 times is substantially less than the ridiculous 39x amount that LinkedIn's IPO skyrocketed to. If the total trading volume's valuation goes from $1 billion to $23.4 billion in the first day of trading then we'd be approaching LinkedIn-levels of bubble hype. How exactly is Zynga going to "put that all to shame"? Are you in possession of some proof that the trading will once again go ape shit past $23.4 billion? I think the recent MySpace sale has shown that a company that makes games (though shaky) is nowhere near as volatiles as a company that relies upon its social network to fill its coffers.

    Remember, some folks estimate that Farmville alone is now worth more than EA [slashdot.org].

    I hate Zynga with a passion and am convinced that Words with Friends has completely destroyed my Android phone's battery life (all the while showing me ads to improve my battery life) but I think they're a far better bet than LinkedIn. I've commented on Zynga's 7 Eleven partnership long ago [slashdot.org] and I think that market penetration is massive and gives them an upper hand that I cannot fathom how the competition will beat -- especially if that's an exclusive contract.

    • by jhoegl (638955)
      All Linkedin and Zynga prove is that Bubble 2.0 is on the rise and that people are hungry to get back into the investment game.
      • by econolog (2081738) on Friday July 01, 2011 @02:59PM (#36636998)
        What we actually have here is new companies filing for IPO's which allows the company to raise capital to expand and generate revenue. Many companies in other sectors launch IPO's long before they are profitable. Consider that we have seen relatively few tech IPO's in the last couple of years. Maybe this should be taken as a sign that there is some growth happening? I thought that before we had a bubble there had to be a build up... After all in the first bubble there wasn't a good frame work for many to generate revenue. Now several forms have been developed and new applications are becoming apparent. This increases the value of tech companies and the odds of new ones becoming profitable. On the other side it could be seen as entrepreneurs going for a mad dash to cash out on the equity they have developed in a scam-like fashion (eg: leaving shareholders with more or less worthless companies while cashing their stock options). I think that is largely how it is perceived in the general financial community but it remains to be seen if this is warranted. It could be a self enforcing effect where financiers see potential signs of a bubble -> cut funding -> entrepreneurs are worried about loss of hard work -> issue IPO. Summary: Could be a little early to call a bubble though the US isn't out of the woods yet.
    • Re: (Score:2, Informative)

      by Anonymous Coward

      Actually, as Ars points out in an article today, Zynga relies on Facebook for ~100% of its profit. So, more than just relying on a social network, Zynga relies upon someone else's social network. Moreover, most of Zynga's profit comes from a very small percent of its customers (those who actually pay), making Zynga incredibly unstable. All this is from Zynga's on statement, BTW, not conjecture. Too lazy to post the link, but as I said, its on Ars Technica in summary format or in the first link under "risks"

      • by KDR_11k (778916)

        Well, they bought up the popular iPhone game Drop7 and renamed it to Drop7 By Zynga. Building up an app store presence would give them other income sources, if their strategy overall is to get a presence in multiple markets that may work out well.

    • by lotho brandybuck (720697) on Friday July 01, 2011 @03:06PM (#36637060) Homepage Journal
      I'm not going to try to understand the whole prospectus, but if they're "raising" 1B, their total valuation will be over that unless the current stockholders want absolutely nothing for their shares. Somehow I doubt that's going to happen.

      Does anybody know what the estimated market cap will be?

      I'm sad that there's so much valuation in this virtual crap as opposed to investment in solid manufacturing or infrastructure, like solar and LED companies, probably becuase that's what I'm in. But some folks obviously think the relentless march to Idiocracy (buying shit in the real world to better play games with your friends in the virtual world???) in this country will be quite profitable, and they may be right.

      • From the Wall Street Journal [wsj.com] last two lines of the article: "In February, Zynga reportedly raised around $500 million from a group of investors at a valuation as high as $10 billion. The company is expected to go public with a valuation of up to $20 billion."
      • by mcavic (2007672)

        if they're "raising" 1B ... Does anybody know what the estimated market cap will be?

        $1 billion, by definition, right? At least until the trading begins.

        • by booch (4157) *

          if they're "raising" 1B ... Does anybody know what the estimated market cap will be?

          $1 billion, by definition, right? At least until the trading begins.

          Bzzt - Wrong!

          If they're selling 10% of the company for $1 billion, then the valuation will be $10 billion. They're not selling off 100% of the company to raise the capital.

      • by protektor (63514)

        The reality is most IPOs have very little to do with reality and a lot more to do with what the big investors and money guys think they can do to a stock to scam as much profit as they can in the frenzy of the first day of trading. Most of these guys get preferred share blocks from the guys setting up the IPOs so they can wait for the right time and then massively dump their shares at the peak and laugh all the way to the bank as the stock nose dives.

        You want to know what kind of power these type of players

    • Re: (Score:3, Insightful)

      by Yakasha (42321)

      I think the recent MySpace sale has shown that a company that makes games (though shaky) is nowhere near as volatiles as a company that relies upon its social network to fill its coffers.

      A company that relies on the sales of games that rely on somebody else's social network is more stable?

      I think if Zynga can separate themselves from their Facebook/Social Media reliance and their own past they'll have a chance of lasting 10+ years.

      Linked-in has carved their niche as the professionals place to network. They may not have the seemingly limitless growth potential that a generic place like Facebook has, but I think their market is less likely to jump ship with the next new thing that comes out,

      • by protektor (63514)

        Investing has almost nothing to do with numbers, and everything in the world to do with mass psychology. The markets move up and down based on what people think not usually because of some concrete fact. Is there any proof that Zynga is worth $100 Billion or whatever? No. People feel like they will last and make them money but Zynga could end up next year being the victim of the latest fad and everyone jumps ship to that instead. Hell people don't even invest anymore based on dividends or P/E, they invest b

    • Re: (Score:3, Insightful)

      by MBraynard (653724)
      Your math would only be correct if it was issuing 100% of it's equity. It's probably issuing a tiny fraction.
    • by adamchou (993073)
      i've never seen a company valued based on its revenue in my years of trading. however, i am still somewhat a novice at looking analyzing fundamentals so that might be the reason why. nevertheless, the more compelling number will be the ratio of earnings per share. that's a number that will really mean something. and based on linkedin's P/E, its currently at about 2,600. That is an astronomically asinine number as the S&P 500's average is ~25. Lets see what kind of numbers they post for earnings then we'
      • by protektor (63514)

        You might want rethink that. Take a look at Microsoft stock about 15+ years ago. Microsoft was not giving out dividends to shareholders. The price of Microsoft stock was only based on what people thought they could sell it for to someone else. People were trading Microsoft stock based on emotions and that is fine as long as you realize that is what is going on. Was Microsoft successful? Oh yes, but that success did not translate in to anything for the shareholders. So it wasn't traded on the monetary value

    • by Tolkien (664315)
      I think it's time for the public to make the methods of "innovation" Zynga uses resurface. Hopefully that should make their stock prices plummet.
    • by aeoo (568706)

      Remember, some folks estimate that Farmville alone is now worth more than EA [slashdot.org].

      I'm pretty sure this is simply the worth of all the outstanding shares added up. If I am correct, that's a worthless indicator. Try comparing revenue or profit instead of net worth. Stock prices are meaningless. If one company makes 1 bil in profit and another makes 1 cent in profit and the 1 cent company is hyped and has a 60 trillion net worth, what does that mean? It means the stock market is crazy. It doesn't mean the 1 cent company is actually better than 1 bil one.

  • Didn't we learn our lesson the last time? Are we really going to go down this road again?
    • The bubble was only bad for most people. If you cashed out at the top, it was awesome. Sadly, I was mostly in the former group.

      • This! That's the key. They wanna play games, let's play games. I for one welcome the Tech Bubble II. This time, I know how the game's played =) Cash me in, then cash me out.

        • by dgatwood (11270)

          I'd imagine a lot of Zynga employees will do just that, if they're smart. Then, since they won't need to put up with being massively overworked and severely underpaid [glassdoor.com] anymore, they'll flee the sinking ship in droves.

          Translation: take your profits after a single-digit number of weeks, and then walk away.

          • by protektor (63514)

            Nice idea but there are usually limits put in place to prevent employees/insiders from doing this exact thing. I have been involved in a couple of IPOs from the inside and each time I could not sell the shares until 3 months after the IPO, and usually by then the hype and rollercoaster has died down. If there is a massive sell off by employees it is going to cause a dive in the stock and investors might wonder what the employees know that they don't since they are jumping ship immediately rather than lettin

    • by Mashiki (184564)

      Obviously not.

      BRB I'm going to launch a new company that analyzes tech companies who are about to launch a new IPO for high sums. I'm sure my new business will be worth at least a trillion dollars, oh and we have sharks...with laser beams on their heads as accountants.

    • Skimming the real money off the undulating torrents of pretend money is one of America's most influential industries.

      Now that the adventure in real-estate has largely dried up, a new fad is needed.
      • by PickyH3D (680158)

        Except it's not even remotely new. Stock market bubbles have come and gone on a scarily common cycle.

        How these idiots keep doing it is beyond me.

        • by Ihmhi (1206036)

          It's quite easy to see. They rape and pillage for all the money they can, and then things go tits up. The economy is in the shitter... except it doesn't affect them because they're millionaires or billionaires. They spend the downtime thinking up a new way to increase their money.

    • Last time was like 12 years ago dude, it's retro now.

      • That was WEB 1.0 Bubble, this will be Web 2.0 Bubble, every new version of the Internet needs a bubble prior to capitalizing all that money into the next WEB VERSION Fads. I predict lots of magic.

  • by spire3661 (1038968) on Friday July 01, 2011 @02:48PM (#36636886) Journal
    as fast as humanly possible.
    • by Santzes (756183)
      Never bet against human stupidity.
      • Never bet against human stupidity.

        Largely because you may not have enough cash to wait it out. Many fund managers were shorting companies like Pets.com back during '98-00, but had to take substantial losses because they didn't have enough collateral to wait until the share prices reversed and headed toward $0.

  • by DogDude (805747) on Friday July 01, 2011 @02:54PM (#36636948) Homepage
    It doesn't really matter what the company's value is. Stock price is completely and totally unconnected to any kind of company value or profit. Stock price is purely a measure of how much people are willing to pay for a "share" of a company. It used to be that people bought stock because they pay dividends, but now few stocks pay any dividend, and people are simply gambling that one day in the future people will pay more for the "share" than they are willing to pay now. All of the analysis into a stock's "value" are about as useful as "analyzing" numbers on a roulette wheel.
    • Stock price is totally connected to perceived value, which of course is a mixed bag of things..
    • Not really, most of the big software names have P/E ratios between 10 and 20:1, so it's VERY connected. It's a bet on what the future earnings will be. Take a look at LinkedIn, they are trading at a P/E ratio of over 2000:1 right now. So to keep their current stock price, they need to grow their profits by 100 fold.

      • by protektor (63514)

        If it so connected to numbers why do none of the formulas for stock picking ever work. It's all voodoo and a lot more mass psychology than anything else. Remember the monkey that one of the big papers had picking stocks and it out performed any of the big investors. Welcome to mass psychology that has nothing to do with actual numbers of the company but rather what people feel and think. There have been company boycotts that people thought would effect sales so the stock went down even though the sales numb

  • All aboard! (Score:4, Interesting)

    by roman_mir (125474) on Friday July 01, 2011 @02:54PM (#36636954) Homepage Journal

    All aboard! The gravy train is leaving this station.

    This is another bubble, which is being inflated now, and since people have short memories and no understanding of economics they are jumping right on it.

    These new software service/product companies are going IPO now, while things are still moving. Wall Street wants to push these companies right now, one after the other, feeding the frenzy, as they know it won't last.

    These insane valuations that Linked In and all these other new IPOs are going at are forward looking, they are assuming 100% profitability at current level. They have no space to go but DOWN.

    Don't believe the hype.

    • by city (1189205)
      In other news, LNKD up 5% today... Don't kill the messager please.
      • by roman_mir (125474)

        So? They were 122.70 once. So anybody who entered on those terms lost quite a bit of money already.

      • by protektor (63514)

        and what exactly has LNKD done today to warrant a 5% jump in stock price? The answer is nothing. It's all mass psychology of what people think might happen and what people think someone else might pay for the stock in the future. People in groups want to move with the groups no matter the cost. So once you step outside that and realize what is going on and aren't influenced by the group then you can make better decision about what the masses are thinking and feeling and can make money based on people's beha

    • as the book EConned by Yves Smith and the film Inside Job by Ferguson have demonstrated, the 'study of ecnomics' is somewhat corrupt and lacking in the rigor that one might find, say, in the field of, say, art history.

      i.e. you cannot write an article about an 11th century cathedral and claim that it proves that christianity is the best religion. but that is the sort of thing going on all the time in economics journals.

      why? the professors are payed off by business interests to push this crap, so that politic

      • by roman_mir (125474)

        as the book EConned by Yves Smith and the film Inside Job by Ferguson have demonstrated, the 'study of ecnomics' is somewhat corrupt and lacking in the rigor that one might find, say, in the field of, say, art history.

        - yes, and more than that.

        The modern era 'economists', are loudspeakers for government propaganda, providing an excuse for the very thing that government wants to do anyway - counterfeit money.

        Here is a good primer on the difference between a mainstream modern "economist", and somebody who understand economics. [youtube.com]

        Government sanctioned "economist" talks about fairness and feelings.

        The guy who understands economics talks about the risk of moral hazard created by the government action.

        Guess which one is 'mainstr

  • by ArhcAngel (247594) on Friday July 01, 2011 @02:55PM (#36636970)
    I've go at least 30 Billion in New York alone on Mafia Wars.
  • by Spad (470073)

    Looks like it's about time for FuckedCompany [fuckedcompany.com] to make its return.

  • As a survivor of the first bubble, followed by the SoCal Real Estate bubble, all I can say is that my BS detector is making loud whooping noises. A company is worth a a reasonable multiple of its earnings; nothing more. And reasonable doesn't mean 650x.

  • In a day and age when a world famous camera label goes for a mere $125 million and a Zynga goes for a Billion, something is wrong.
    • by protektor (63514)

      Welcome to the modern stock market. It isn't based on returns to the stock holders, most companies don't even pay dividends, but rather mass psychology of what people think and feel about the company and what they hope someone else will pay for the stock in the future.

      If I could raise millions or better yet billions based on selling a stock that never pays a dime to the shareholders I would do it in a New York second. I also know that the average investor is actually going to have zero say how the company i

  • by michaelmalak (91262) <michael@michaelmalak.com> on Friday July 01, 2011 @03:27PM (#36637212) Homepage
    It's approximately the agricultural GDP of Rhode Island.
  • by The Great Pretender (975978) on Friday July 01, 2011 @03:30PM (#36637238)
    IPOville - Help your friends over value another useless company, click on this link...
  • "Farmville developer Zynga finally filed its IPO paperwork today, as it wants to raise $1 billion..."

    There, now everybody who isn't familiar knows wtf Zynga is, and can hopefully avoid wasting their time on this blurb, which was so thorough there was no room for even a Wiki link.

    I don't know why I am expecting any standards of halfway decent journalism at Slashdot, but I am nonetheless, so hear my bitching.
    • Don't say that. It embarasses the developers at Zynga to admit that the only thing they've come up with that has gone profitable is a Farm game for middle aged women.

      They've tried so hard to 'push' their game development toward the metrosexual crowd that they think of themselves as belonging to. Every time you look, there's another fucking disco cow or Lady Gaga themed promotion going on there. Yoville is where they wanna live and it's a flop.

      It must be really depressing to be a hip young developer, and

  • What bubble?
  • Morgan Stanley -

    rescued at the last minute by a japanese bank. was a hairs breadth from becoming another Lehman level bankruptcy

    BoA Merrill -

    a shotgun wedding, after Merrill drove itself over the CDO cliff by firing the risk managers for a few short years of record profits. they fire the CEO, then hire a new CEO who does a million-dollar refit of his office, then dithers around a whole year before doing the exact same thing the fired CEO wanted to do - sell the company to Bank of America (except this time a

    • by protektor (63514)

      I wish I could mod you up because you are exactly correct. There are about 10-20 people who control most of the massive shifts in the stock market and they are hedge fund and mutual fund managers. They can absolutely destroy companies because of the amount of money and investors they represent and control. The average Joe off the street doesn't stand a chance against these guys. Your best bet is to try and ride their coat tails and hope you don't get thrown off and end up on the floor broke. Not to mention

  • So who is going to be the biggest cash-grab fraud this year? Groupon or Zynga? Let me know when you're holding the empty bag and we'll party like it's 1999.
  • That is... What I mean to say is that the Government can and does shut down domains; Sometimes without much research into the repercussions. They usually plaster up a big scary splash page "Child Pornography and/or Copyright violation is Illegal. Your IP is now logged. Criminals will be prosecuted within the full extent of the law." that ensures no visitors will be coming back if they see it.

    Perhaps I'm concerned over nothing; Maybe there's a commercial advisory body that's knowledgeable about the web

    • by protektor (63514)

      If you believe their is reasonable oversight for seizing domains, I have ocean front property in Nevada I want to sell you. The big guys won't get caught in the drag net because they have lobbyists who are paid to pay off...excuse me give political contributions to the people in Washington who matter.

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