Social gaming company Zynga is expected to float in the next 24 hours in a float that will raise $US1 billion, value the company at $7 billion and be the biggest tech float since Google went public in 2004.
But some analysts are already mixed on its potential for success.
Sterne Agee analyst has already labelled Zynga stocks as “sell”, according to the New York Post, saying the company’s margins are under pressure.
However, BTIG analyst Rich Greenfield has reportedly said in a research note that investors should buy, with social gaming on the rise.
“We view social gaming and particularly Zynga’s social games in much the same way – they are a new “cure” for boredom, and unlike TV, social games can be played anywhere on the planet that you have internet access, while TV requires you to be in your living room – although YouTube and TV Everywhere are changing that,” he said.
The listing has been a long time coming for the social gaming giant, whose chief executive Mark Pincus has reportedly delayed a move to go public due to market volatility. But now, reports suggest the company will debut on Wall Street tomorrow.
The company hopes to sell 100 million shares raising $US1 billion, according to Bloomberg, which could give it a valuation of around $US7 billion – that would top LinkedIn and be one of the largest IPOs in recent technology history.
Earlier reports from Bloomberg and Reuters indicated Zynga was set to list tomorrow.
Zynga officially filed for an IPO last week, when it updated its filing to reveal a price range for shares of between $US8.50-10. This was actually rumoured to be a downgrade from an earlier valuation, although reports suggested Pincus backed off from a higher market cap due to volatility in the marketplace.
If the IPO is successful, Pincus stands to become significantly wealthy. Although he’s not actually selling any of his own personal shares next week, he could be worth over $US770 million – and even more if stock rises quickly.
Some of the other biggest winners include former EA chief creative officer William Gordon, with 61 million shares, along with LinkedIn co-founder Reid Hoffman, with 3.1 million shares.
Equity firms KPCB Holdings, Institutional Venture Partners, Union Square Ventures and Avalon Ventures, along with Digital Sky Technologies, all stand to make quite a significant amount of cash.
And that worth could improve as well – Zynga is one of the few tech companies listing at the moment that is actually turning a profit. Net income was $US12.5 million in the third quarter.
However, despite the rush of tech stocks over the past year there are risks.
Although Groupon, LinkedIn and Pandora have all listed in the past year, these have been relatively minor and analysts have so far been disappointed with their performances. The last major IPO in tech was Google’s in 2004, when it raised over $US1.5 billion with a market cap of $23 billion.
Although this year has seen a number of tech stocks debut on the stock exchange, many investors have been disappointed.
LinkedIn debuted on the New York Stock Exchange in May, and has since fallen 29% against a 7.34% drop in the Dow Jones Industrial Average. Pandora debuted a month later, but has since fallen 39% against a 0.24% drop, while Groupon has fallen 11.59% since early November against a 5.4% drop in the NASDAQ.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
