Zynga valued at $7 billion in IPO

With unexercised options, the company could be worth as much as $8.9 billion. But the $10 price in its initial public offering is lower than Street chatter of $12 a share.

By Charley Blaine Dec 15, 2011 7:36PM

Charley BlaineTwo weeks ago, Zynga projected it would sell 100 million shares in its initial public offering for $8.50 to $10 a share. 

It did. That translates into a market capitalization of $7 billion. With unexercised options, the market cap rises nearly to $8.9  billion.

But the results of Thursday's IPO had to be something of a disappointment. There was chatter on CNBC that the IPO would price at $12 a share. And Zynga originally thought it would sell its shares at $20.

A better gauge of investor sentiment about the company will come Friday when shares open for trading on Nasdaq under the ticker ZNGA.


Post continues below:

So what happened? IPOs have been a disappointment this year. Groupon (GRPN) went public at $20, jumped to $31.14 and then fell to as low as $14.85 on Nov. 28. The shares have recovered a bit and finished Thursday at $23.08, a 15% gain over the IPO price.

Other IPOs have performed weakly as well. LinkedIn (LNKD) went public at $45 and zoomed up to $109.97 but has slumped, ending Thursday at $66.38.

And while Michael Kors Holdings (KORS) went public on Wednesday at $20 and ended up 21% Thursday at $24.20, it closed below its opening price of $25.

One company, Newgistics, pulled its IPO, citing shaky market conditions.

In fact, small-cap stocks have had a miserable year. The Dow Jones industrials ($INDU) are up 2.5% this year, with the Standard & Poor's 500 Index ($INX) down 3.3%. The Russell 2000 Index ($RUT), which tracks small-capitalization stocks, is down 8.8%.

So there was some wariness about Zynga, not the least of which is that 94% of its revenue comes from Facebook, which is expected to go public in the second quarter of 2012.

The company was founded in 2007 by Mark Pincus, who named the company after a pet, an American bulldog.

Zynga's sales more than doubled through September, to $829 million, and it has earned $121 million since the start of 2010, according to its SEC filing. What is more, the top five games on Facebook are Zynga titles: "CityVille," "CastleVille," "FarmVille," "Zynga Poker" and "Words With Friends."

But some analysts have noted that use of some of its older games has been dropping. Moreover, it collects money from only 3% of 227 million users.

Earlier this week, Sterne Agee analyst Arvind Bhatia rated the stock "underperform" even before it priced.

"We think growth is slowing," he told CNBC. "We think margins are under pressure, and we think free cash flow, this year, has come to a standstill."

Others believe the company has the chops to expand beyond Facebook. Pincus is known as a driven taskmaster.

15Comments
Dec 16, 2011 7:04AM
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I Don't Trust Zanga, They Have Proven to me many times that they are Greedy and Corrupt. my guess this is just another ploy to take peoples money. I closed my Face book acc. Due to scammers and hackers. There is a lot of that on face book. Even today Zanga tries to send me their crap even after i closed my acc. of FB. Its been almost a year i closed it.  And another Thing Don't believe them when the ask for Donations for something, It goes straight to their pockets.
Dec 15, 2011 9:36PM
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Pump it.  Then dump it...within a few days after it's gone public before it's had time to tank.  IPOs often soar the first few days of public trading as the suckers line up in droves to buy.  Then, with all the sucker buying exhausted, no one is around to keep the price propped up.  There's often not a bigger fool around when you really need one.  Too bad!

I'm reminded of the old market adage: Buy on the expectation, sell on the news.
Dec 16, 2011 8:41AM
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zynga is a bad investment, they love to screw over paying customers!
Dec 16, 2011 7:52AM
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Just goes to show fools are still out there. The top dogs already got there coin. The last ones in lose their shirt. Because all the player of the games already lost. poor service nothing ever gets fix or right from the start and it never will
Dec 16, 2011 11:16AM
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All I know about zynga is that their toolbar is a portal to every computer virus known to man. I've cleaned up several computers where I work and found the main culprit is the zynga toolbar. I have a friend who plays a lot of cityville, and about every other week I have to go in on his computer and remove all the malware he has amassed. I don't do facebook for this reason. I've seen too many people ruin their computers with all this social networking crappa dappa and I'm not going to become another victim. Bull rider, you've got my vote!
Dec 16, 2011 11:30AM
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Zynga sucks donkey balls!

I am pretty sure this will be the portal that China uses to start world war III.

Plus: Cityville still owes me 480 lost zoning permits!

Dec 16, 2011 10:19AM
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"IPOs have been a disappointment this year." Yet all three examples you give are currently trading above their IPO pricing. One at more than 50% above IPO. Not sure what your definition of disappointing is.
Dec 16, 2011 1:40PM
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At exactly 1230 hrs these scumbags called to redouble selling efforts so down the toilet we go. Scumbags now in complete control, once again....Will be a tough afternoon apparently. Cheating crooks doing and undoing at will making tons and tons of dough...So fricking sad. And not a thing we can do about it.
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My initial headline was flat wrong, and I apologize.
Dec 16, 2011 12:29PM
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Another thing, don't forget today is 4x witching...At 1115 hrs we started to drift lower a bit, do not trust these scumbags as far as we can see them...Remain cautious...More later.
Dec 16, 2011 11:38AM
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Zynga sucks I have played mafia wars for two years there are daily glitches in the soft ware and servers what crack head would value this stock at 7 billion dollars, that's right the crack heads running your retirement fund bet it takes a tank later this year. 

Also I reported a complaint about a glitch about 6 months ago the told me they would give me 20 credits and a game item for my troubles and get back to me they never did and I never got my credits. 
Dec 16, 2011 11:36AM
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I do not see the value? Looks like a bubble that is already bursting.  

Dec 16, 2011 11:34AM
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Smile Zynga raised $1 billion from 100 million shares at $10. You can't presume there's enough fools to buy those other shares.
Dec 17, 2011 7:46PM
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The only true value at zynga are the computers they use to animate and operate their business. Other than that everything is a mirage. Mark punkus is trying to sell you something that doesn't exist. He uses other people's money exclusively to produce a product that has zero true value. And he sold some of his shares for $14 a share before the IPO. He made over $100 million as his companies stock plumitted and as his shareholders lost 6% on their opening day. Mark punkass should be arrested for fraud. SELL NOW! DO NOT BUY !
Dec 16, 2011 10:19AM
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Get this domain name at GoDaddy auctions.  Makes a great tool to drive traffic to your business.  Also makes a great name for bloggers that are happy or not happy with Zynga's games or service !!!
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