Farmville game developer, Zynga Inc (ZNGA) is planning to file terms with regulators on Friday for an IPO that could raise all of $900 million. The estimate is based on a float of 10 percent that could be priced in the $8-10 range.
The figures are a come-down from a previous valuation of the company at $14.05 billion. This was obviously ambitious, considering that Electronics Arts (NASDAQ:ERTS) has a market cap of $7.69 billion and Activision Blizzard (NASDAQ:ATVI) $14.21 billion, even though Zynga is likely to become one of the fastest tech companies to cross the $1 billion mark in terms of revenue.
Started in 2007, Zynga grew its annual revenue from $19.4 million in 2008 to $597.5 million in 2010, and recorded revenues of $828.9 million in the nine months to September 30. Over the same period, net income was $30.7 million and earnings before interest, taxes, depreciation and amortization (EBITDA) were $235.5 million. Though it is obviously profitable, cash flows are taking a hit on account of investments in new games such as “Castleville,” which are doing well.
Wedbush Securities analyst Michael Pachter was of the opinion that Zynga could command a higher valuation if it went public in 2012. “They should file their December quarter financials first. People will pay for growth,” he said.
Considering that Facebook is also planning an IPO next year, Zynga probably does not want to float its issue around that time and be crowded out.