Sat, Dec 17, 2011 - Page 10 News List

Zynga raises US$1 billion, prices IPO at top of range

Bloomberg

Zynga Inc, the largest maker of games for Facebook Inc’s Web site, raised US$1 billion in its initial public offering (IPO), pricing the shares at the top of the marketed range.

The developer of games such as CityVille, FarmVille and Mafia Wars sold 100 million shares for US$10 each. Zynga had offered the stock for US$8.50 to US$10 apiece. It was to start trading yesterday on the NASDAQ Stock Market under the symbol “ZNGA.”

The offering is the biggest by a US Internet company since Google Inc raised US$1.9 billion in its 2004 IPO. The game maker’s increasing ubiquity and expansion prospects appeal to investors, according to Colin Sebastian, an analyst at Robert W. Baird & Co in San Francisco.

“Zynga and its games are becoming consumer brands and there is a lot of recognition for growth potential,” he said. “My guess is that the shares will be well-received.”

Founded by chief executive Mark Pincus in 2007, Zynga doubled sales to US$829 million in the first nine months of this year. The IPO values Zynga at as much as US$7 billion, or 6.8 times revenue in the year through Sept. 30. That’s more than three times rival Electronic Arts Inc’s (EA) price relative to sales over the same period.

Electronic Arts, based in Redwood City, California, bolstered its own online services by purchasing PopCap Games this year. EA, the maker of The Sims and Scrabble for mobile devices had a market value of US$6.9 billion, or about 1.8 times trailing 12-month sales.

Nexon Co, a Tokyo-based maker of games for Facebook, including Zombie Misfits, started trading this week after raising US$1.2 billion in an IPO, Japan’s biggest this year.

“You’re definitely going to see more competition” for Zynga as other companies expand their user bases, said Richard Greenfield, an analyst at BTIG LLC in New York. “On the other hand, I think it’s also going to bring more people into the overall social gaming space.”

Zynga planned to sell all of the shares in the IPO, and to use net proceeds of about US$889 million for game development, marketing and general corporate purposes.

The company gets more than 90 percent of its revenue from Palo Alto, California-based Facebook, which is examining a US$10 billion IPO that would value the company at more than US$100 billion, a person with knowledge of the matter said last month.

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