Zynga: a possible valuation of 10 billion dollars?

While it appears that an eventual stock market listing by Facebook is starting to come to light, another web player also appears to be preparing for such an event: software developer Zynga, looking for a market valuation of 10 billion dollars.

Among web companies that have seen a rapid pickup in activity over the last few years, some have attempted stock market listings to help fund their ongoing growth and put distance between themselves and their competition.

2011 was rich with new listings, with many investors looking for growth from new generation IT stocks in a difficult economical market, although such investors have also had to settle for lower returns than what they may have hoped for in the past.

Market conditions have degraded since the beginning of the year, with many initial valuations no longer being relevant, while a rushed listing can also at times devalue a stock.

There is still a lot of interest in listing companies though, with investors still seeing positive signs in IT, but this may not last if market conditions continue to deteriorate.

Social network Facebook is currently studying a stock market listing in the first half of 2012, instead of late 2012 or in 2013, while another player in this sector could also look at taking their chance on the public markets soon: social games developer Zynga.


Second largest software developer in the US?
The company is looking to raise 900 million dollars by launching at between 8 and 10 dollars a share, with such numbers valuing the company at 10 billion dollars, when the float takes place in December.

Bloomberg notes that this valuation is lower than fair value, estimated at 14 billion dollars in documents filed with the SEC. The stock market listing will still make them the second largest games developer in the US, ahead of Electronics Arts (valued at 7.7 billion dollars), but behind Activision/Blizzard (14 billion dollars).

Zynga is pushing their 7 million users as a positive (consumers of virtual goods), but the software developer also has to take into consideration that their activity tapered off in the second quarter of 2011 due to no new games being launched, while they are also enormously dependant on Facebook.

The developer has announced new initiatives like the Project Z platform, which should help reduce their links with the social network, although it won’t be enough to make them fully independent. With 800 million users, Facebook still represents a vast source of users for Zynga... as long as the social network doesn’t decide to change their policy on earning streams.