Is Zynga Inc. worth $9 billion?
The social gaming juggernaut on Friday told potential investors that it planned to price its stock between $8.50 and $10 a share in order to raise up to $1.15 billion.
The price range implies that the San Francisco-based company that began a little more than four years ago with an online poker game on Facebook could be worth up to $9 billion.
Zynga's initial public offering has been one of the most anticipated of the year since the company in July declared its intent to sell its shares on Nasdaq. But the company held off its IPO when the stock markets collapsed mid-August. The European financial crisis that ensued further eroded investor confidence.
Given that global financial markets remain highly volatile, Zynga's decision to press play on its public offering this month is somewhat vexing. Furthermore, few companies choose to go public in December, when mutual fund managers who are likely buyers are loathe to make risky bets that can upset their portfolios' performance for the entire year at the last minute.
But the maker of FarmVille, CityVille and other social games is apparently confident it can overcome those difficulties. Its executives are set to begin a road show Monday to meet with potential investors in an effort to drum up excitement for the company, culminating two weeks later in the stock's debut on Nasdaq.
A lot can happen in that period of time as investors grill Zynga's officials on the company's business plans, its ability to consistently turn big profits and its ability to maintain its torrid growth pace. Depending on how well the company satisfies those questions, the amount Zynga ultimately fetches can fluctuate right up to the minute before its shares hit the trading floor.
Zynga has already anticipated some of those concerns in a series of documents it has filed since July with the U.S. Securities and Exchange Commission outlining its financial performance and arguing that the market for online social games is poised to explode, nabbing a significant share of the $49 billion video game market that has thus far been dominated by console games.
The company, whose games are played by more than 150 million users a month, last year made a profit of $90.6 million on $597.5 million in revenue, largely from advertising and selling virtual goods for its games, which include Mafia Wars, Zynga Poker and Words with Friends. A year earlier, Zynga reported a $52.8 million loss on $121.5 million in sales.
-- Alex Pham
Photo: Zynga general manager Erik Bethke speaks at a Zynga event in San Francisco in October. Credit: Jeff Chiu / Associated Press.