The company, known for its FarmVille and CityVille line of social media games, filed on July 1 that it would raise up to US$ 1 billion -- giving the company a valuation of up to US$ 20 billion. The company has not yet said how it plans to price the stock.
While some might scoff at the notion of an online gaming vendor having a successful IPO, it's actually one of the more solid IPOs of the year, noted Fortune:
[T]he social gaming company had revenue of $597 million and a net profit of $90 million. Unless its growth slows dramatically, Zynga's revenue will easily top $1 billion this year....Proceeds from Zynga's offering will go to the company, not insiders. Yet the company has $1 billion in cash. Even more impressive, it's been generating cash since the fall of 2007: $326 million in 2010 and $103 million last quarter alone. This is a well-run, financially healthy company."
Bubble or Not?
Zynga is just one in a series of high-profile Internet IPOs this year, starting with LinkedIn, which opened at US$ 60, doubled the first day, and these days bumps around in the low US$ 90s, while Pandora started at US$ 12, went to US$ 26, and is now at US$ 18. Groupon, on the other hand, isn't necessarily expected to do so well, because the company faces more competition and is considered not to be as well-run, which much of the money for its IPO slated to go to investors.
So after the last couple of relative disappointments, Zynga is making tech IPOs fun again. It is likely to dethrone LinkedIn from its "biggest IPO since Google!" spot, and while some people still use the b-word in referring to it, numerous articles in the financial press are pointing out the company's solid financials. Plus, a rising tide lifts all boats -- after Zynga's announcement, LinkedIn and other tech IPOs also rose.
This is all, of course, an appetizer on the way to the IPO pièce de résistance, Facebook itself, on which Zynga is heavily dependent. It hasn't filed for an IPO yet, but is widely expected to do so. And when that happens....who knows.