Editor’s note: This article was first published in June 2011, and its valuation and fundraising figures come from press reports before the IPO. Zynga went public in December 2011 at a valuation of around $7 billion, raising about $1 billion.
Zynga, the company founded by Mark Pincus and known for its famous Facebook game FarmVille, is preparing to go public, and its initial public offering could value it at close to $20 billion, according to the Financial Times.
The company is expected to raise a total of $2 billion when it lists. The offering will be backed and led by Morgan Stanley, Bank of America, Barclays, JPMorgan and Goldman Sachs.
If it reaches that initial valuation, it would be as much as 23 times the company’s gross revenue in 2010. Some investors say Zynga is a safe bet and an absolute phenomenon because of the way it makes money, since its business model is not based on advertising.
Others think that after the latest IPOs of these new dot-coms, with their senseless high valuations, the risk of a bubble keeps growing.
Still, as we have seen lately with this kind of company, the stock market debut will trigger a sharp rise on the first morning. The biggest question is where the stock will be in 3 or 5 years’ time, because, as Warren Buffett thinks about tech companies, nobody can know, and these stocks become “speculation fodder.”
Further reading
- Zynga: selling a product that doesn’t exist is a profitable business
- The virtual real estate business
- Two millionaire internet businesses made in Japan
Featured image: Robert Scoble, CC BY 2.0, via Flickr.
