Public offering could value online games firm Zynga at $20bn
The company, which makes popular games that are played on Facebook, did not say how many shares it was planning to sell or give an expected price range, according to a US government filing.
Zynga’s IPO could raise $1.5bn-$2bn and could value the company at $15bn-$20bn.
“I think it’s going to be an exciting IPO,” Sterne Agee analyst Arvind Bhatia said. “It’s unique. It’s one of a kind. The growth is amazing.”
Zynga is behind FarmVille and Mafia Wars and is the top game publisher on Facebook.
While its games are free, its revenue comes mainly from selling virtual items that people use in the games.
In the three months ended March 31, Zynga’s stockholders broke even on revenue of $235.4 million compared to $101m for the same quarter in 2010. During the same period, Zynga reported adjusted earnings before interest, taxes, depreciation and amortisation of $112.3m, up 20%.
“At 232 million monthly actively users and (revenue of) $235m, that is $1 per monthly active user per quarter, which is impressive,” said Wedbush Securities analyst Michael Pachter.
Zynga offers an alternative to investors beyond traditional videogame companies, which have seen their share prices erode in recent years.
Zynga’s games, which do not require significant hardware, have been eating into the $60.4bn global videogame industry, which consists largely of action or sports games played on consoles and TV sets.
Gaming stalwart Electronic Arts is estimated to be trading at 11 times its enterprise value in the past year, while Activision is trading at six times. Zynga is trading at 34 times an estimated $15bn valuation.
However, Zynga could yet fall prey to the factors besetting traditional game publishers, including pressure to churn out hits to prevent fickle players from moving on to the next gaming craze.
Zynga has expanded rapidly through small acquisitions at the rate of about one a month in the last year.
Zynga’s dependence on Facebook is seen as a benefit and a risk.
The company generates nearly all of its revenue through the site, and in the filing, said “any deterioration in our relationship with Facebook would harm our business”.
FACEBOOK Inc is on course to generate $1 billion in revenue this year from social gaming, according to Kevin Ryan, a leading Internet entrepreneur and former chief executive of online advertising giant DoubleClick.
Most of that revenue will come from advertising, Ryan estimated in an interview with Reuters this week.
The forecast also includes revenue from Facebook Credits, which allow users to buy items for games and other activities on the social network, he added.
Ryan is chief executive of luxury flash -sales company Gilt Groupe. His brother Sean Ryan became director of gaming partnerships at Facebook in early 2011.
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