July 1, 2011

Zynga Files IPO Paperwork

Zynga Inc. filed paperwork on Friday for an initial public offering.

The company said it hoped to raise up to $1 billion.  It did not specify the number of shares it was planning to sell or give an expected price range.

Reuters reported that Zynga's IPO could raise $1.5 billion to $2 billion and could value the company at $15 billion to $20 billion.

"Zynga has had a massive positive impact," Vikas Gupta, CEO of TransGaming, told USA Today.

"Zynga has made video games more mainstream than ever before. It has shattered all the rules about monetization about free games. And it has changed the industry's thoughts about the need to create multimillion-dollar games."

The amount of money a company says it can raise in its first IPO filings is used to calculate registration fees.

Zynga is the company behind popular games on Facebook including Farmville and Mafia Wars with over 232 million monthly active users.

Zynga is the top game publisher on Facebook and its revenue comes mainly from selling virtual items like tractors and weapons that are used to enhance game play.

The company's common stockholders broke even on revenue of $235.4 million in the three months ending March 31.  Zynga reported adjusted earnings before interest taxes depreciation and amortization of $112.3 million.

Zynga offers an alternative to investors seeking to expand beyond traditional videogame companies, which have seen their share prices erode in recent years.  Zynga's games have been eating into the $60.4 billion global video game industry, which consists largely of action or sports games played on consoles and TV sets.

According to DFC Intelligence, online video game revenue is expected to reach $18 billion by the end of 2011 and $26.9 billion by 2015.

Zynga expanded rapidly through small acquisitions at the rate of about one a month in the last year, as it seeks to dominate the games market and expand internationally.


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