Skip to main content

Zynga may file for IPO as early as tomorrow

zynga-cityville-this-aint-no-farm

Zynga, publisher of Facebook games like FarmVille and CityVille, will file for an initial public offering (IPO) as early as tomorrow, according to WSJ. The move has been expected for some time, as a wave of new tech companies have begun seeking public funding. Zynga hopes to raise as much as $2 billion and has picked Morgan Stanley to lead the offering. Other huge banks like J.P. Morgan Chase & Co., Barclays Capital, and Bank of America Merrill Lynch will also be involved in the IPO somehow. If there’s money to be made, the big guys want in.

Zynga is expecting to be valued between $15 and $20 billion, which would put it well above the huge publishers like EA, which is valued at only about $5 billion. Many claim that the the social “free” games publisher is overvalued, arguing that its reliance on Facebook is a liability and that social gaming itself may be more of a fad than a lasting trend. Still, investors are hungry to invest in social networks. LinkedIn and Pandora recently went public with Groupon in the process as well. Facebook, the real crown jewel of the social network pile, is likely planning its IPO for 2012.

Related Videos

However, it may not be entirely fair to lump Zynga in with all other social networks. It is actually profitable–extremely profitable. Nitsan Hargil, an analyst at GreenCrest Capital Management estimates that Zynga’s sales will reach $1.5 billion in 2011, with a third of that ($500 million) being profit. Not bad.

“Of all the companies we’re looking at, it’s the one we’re most excited about because it’s a real company with real revenues,” said Hargil.

Though many core gamers dismiss Zynga’s “freemium” games model, publishers like EA and Valve have already begun offering their own freemium games, which are free to play, and attempt to hook players into playing for months or years, baiting them with small, cheap microtransactions.

Editors' Recommendations

Free-to-Play games coming to Xbox Live, says insider

Microsoft may be trying to get on the free-to-play bandwagon as well. Develop reports that Microsoft is quietly calling on developers to make free-to-play games for its Xbox Live service. The Redmond software maker will also add microstransaction support to Xbox 360 games, enabling in-game items to be bought or sold for Microsoft Points without leaving a game.
Microsoft likely sees the writing on the wall. Companies like Zynga have become wildly successful pumping out free Facebook games like FarmVille, CityVille, and Mafia Wars. These games are all free to play, but end up costing you money if you really want to enjoy yourself. Like a drug dealer, they offer the first hit for free, but dedicated players are constantly tempted to take the fast road and purchase virtual items and upgrades to help them achieve more. Instead of a regular game where there is an end, free-to-play (F2P) games only goal is to keep players addicted and playing as often as possible, hopefully forever.
This move is somewhat contrary to the very idea of Xbox Live, which is a pay service itself. Until now, there has been support for nicrotransactions out-of-game, but these usually involved large update packs for games like Call of Duty.
Microsoft isn't the first hardcore games company to give this a go. EA has been toying with free-to-play games for some time, and now offers two versions of Battlefield to play for free, as well as Tiger Woods PGA Tour, Need For Speed World, Dragon Age Legends, BattleForge, and a line of games targeted at Zynga users. Valve, which operates the Steam PC platform, is also onboard and has turned Team Fortress 2 into a F2P game.
(Image via ConsolePress)

Read more
Zynga IPO imminent?

According to AllThingsD, Facebook game developer Zynga will file its IPO papers within the next two weeks. “Sources close to the situation” say the move is imminent and that Goldman Sachs will be among the lead bankers.

Anytime a social media-esque company sparks IPO rumors, the bubble talk follows. While something so extreme as the race to avoid the bubble bursting may not be Zynga's primary motivation, the success of the Pandora and LinkedIn public offerings could easily be part of Zynga’s motivation to follow suit. After filing its IPO, LinkedIn’s stock took a shocking jump and boosted the company’s value to approximately $9 billion. And if those numbers weren’t enough to have Zynga execs mulling the move, the fact that the company’s top three investors own $5.14 billion in shares might have something to do with it.

Read more
Is FarmVille-maker Zynga really worth $10 billion?
zyngas value may reach as high 9 billion farmville by zynga

Truckloads of dollars continued to rain down upon Silicon Valley this week, with social game-maker Zynga completing a $500 million round of fund raising that placed the company's value at nearly $10 billion, according to a report by All Things D.

Investors in the funding round, which All Things D's Kara Swisher says is "essentially a precursor to an initial public offering," include Morgan Stanley, Fidelity Investments and T. Rowe Price, among others.

Read more