Zynga's (ZNGA) IPO Goes to the Dogs
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Zynga's (Nasdaq: ZNGA) highly anticipated IPO was greeted with a cheer on Wall Street Friday. However those cheers quickly turned to boos after the social gaming company broke below the IPO price.
Shares of the Farmville and Cityville game maker opened for trading on the NASDAQ at $11, or 10 percent above the $10 pricing. Within the first 10 minutes, the IPO price was broken. Shares currently sit at $9.54, down about 5 percent.
100 million shares were sold in the offering and the company will have approximately 700 million shares outstanding after the offering. This would give the company a valuation of approximately $7 billion.
Such a valuation is already raising eyebrows on the Street. The largest U.S. gaming company Electronic Arts (Nasdaq: ERTS), for example, has a market just $7.1 billion.
Zynga has shown impressive results... although maybe not impressive enough to support the valuation.
From 2008 to 2010, Zynga's revenue increased from $19.4 million to $597.5 million, bookings increased from $35.9 million to $838.9 million, and the company went from a net loss of $22.1 million to net income of $90.6 million. Adjusted EBITDA increased from $4.5 million to $392.7 million. For the nine months ended September 30, 2011, revenue was $828.9 million, bookings were $849.0 million, net income was $30.7 million and adjusted EBITDA was $235.5 million.
Analysts were mixed on the new issue.
Before the IPO hit the tape, Cowen initiated coverage on Zynga with a Neutral rating. The firm cites concerns about the company's ability to maintain growth at a level that justifies its current valuation.
Following the debut, BTIG picked up coverage with a Buy rating and $13 price target. The firm said ultimately Zynga is a media company, and offers a 'cure' for boredom.
The underwriters of the IPO are operating under the IPO quite period rules, which will restrict them from offering their ratings on the stock until it expires.
Shares of the Farmville and Cityville game maker opened for trading on the NASDAQ at $11, or 10 percent above the $10 pricing. Within the first 10 minutes, the IPO price was broken. Shares currently sit at $9.54, down about 5 percent.
100 million shares were sold in the offering and the company will have approximately 700 million shares outstanding after the offering. This would give the company a valuation of approximately $7 billion.
Such a valuation is already raising eyebrows on the Street. The largest U.S. gaming company Electronic Arts (Nasdaq: ERTS), for example, has a market just $7.1 billion.
Zynga has shown impressive results... although maybe not impressive enough to support the valuation.
From 2008 to 2010, Zynga's revenue increased from $19.4 million to $597.5 million, bookings increased from $35.9 million to $838.9 million, and the company went from a net loss of $22.1 million to net income of $90.6 million. Adjusted EBITDA increased from $4.5 million to $392.7 million. For the nine months ended September 30, 2011, revenue was $828.9 million, bookings were $849.0 million, net income was $30.7 million and adjusted EBITDA was $235.5 million.
Analysts were mixed on the new issue.
Before the IPO hit the tape, Cowen initiated coverage on Zynga with a Neutral rating. The firm cites concerns about the company's ability to maintain growth at a level that justifies its current valuation.
Following the debut, BTIG picked up coverage with a Buy rating and $13 price target. The firm said ultimately Zynga is a media company, and offers a 'cure' for boredom.
The underwriters of the IPO are operating under the IPO quite period rules, which will restrict them from offering their ratings on the stock until it expires.
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