Zynga files for IPO

Tuesday, July 5, 2011

SAN FRANCISCO -- Social-gaming sensation Zynga filed an initial public offering today that could raise up to $1 billion and value it at up to $20 billion.

The maker of the popular FarmVille and CityVille games, played by tens of millions, has picked Morgan Stanley to lead the offering, according to a government filing. Goldman Sachs Group, J.P. Morgan Chase, Barclays Capital and Bank of America Merrill Lynch will also play a role in the IPO.

A valuation of $20 billion would be nearly equal to Yahoo's market value of $20.1 billion.
Beyond making Zynga's investors and executives filthy rich, the IPO should prove a boon to the fledgling $2.5 billion social-gaming market, say gaming executives.
"Zynga has had a massive positive impact," says Vikas Gupta, CEO of TransGaming. Its service, GameTree TV, delivers casual games via set-top TV boxes. "Zynga has made video games more mainstream than ever before. It has shattered all the rules about monetization about free games. And it has changed the industry's thoughts about the need to create multimillion-dollar games."
In the filing, Zynga said it posted a $100 million profit last year, most of it courtesy of its gaming partnership with Facebook. Indeed, gaming has proven to be a reliable moneymaker on Facebook.
Adds Rajat Paharia, founder and chief product officer at Bunchball, "It raises our profile with consumers and business partners."
Zynga's planned stock offering comes hard on the heels of IPOs by HomeAway, LinkedIn, Pandora and Groupon. The tech wave has helped propel second-quarter IPO revenue past $10 billion for the third straight quarter, with $11.9 billion on 47 IPOs, according to market researcher PwC.
The feverish trading of recent IPOs, and anticipation for Facebook and Groupon, has fed into what many market observers are calling a tech bubble. The last one, more than 10 years ago, popped amid overvalued stocks in spite of underwhelming revenue.
Many of the backers of Zynga and its flamboyant CEO, Mark Pincus, are some of Silicon Valley's biggest influencers. They inclue venture-capital heavyweight Kleiner Perkins Caufield & Byers, in the form of partners John Doerr and Bing Gordon; LinkedIn co-founder Reid Hoffman; Digital Sky Technologies, the firm run by Russian investor Yuri Milner; VC firm Andreessen Horowitz, headed by Netscape co-founder Marc Andreessen; and Facebook board member Peter Thiel.
The 4-year-old Zynga, which boasts about 270 million unique monthly users, is widely available on Facebook, Yahoo and other digital platforms. It is expected to ring up $1.5 billion in sales of virtual goods and advertisements this year, says research firm GreenCrest Capital.