Zynga reportedly set to file for public offering

Social games company prepared to strike while social media IPO iron is crazy hot

Photo credit: sabrina.dent/Flickr

Zynga, the maker of popular social games such as CityVille, FarmVille and Mafia Wars, reportedly intends to file for an initial public offering by next week, according to All Things Digital's Kara Swisher.

And why not? Following the spectacular Wall Street debut of business social networking site LinkedIn last Thursday, it's clear that investors have an insatiable thirst for social media plays.

Whether they're sound companies or wise investments, well, that's another story. But why let prudence or rationality get in the way of a good bubble? There's money to be skimmed by the underwriters and windfall profits to be handed to their A-list clients!

Founded in 2007 by CEO Mark Pincus, Zynga is one of a handful of hot social companies -- along with Facebook, Twitter and Groupon -- poised to convert their soaring value in the secondary markets into IPO riches.

While the San Francisco-based company makes games for Myspace, Yahoo and mobile platforms, Facebook is the driving force behind Zynga's success. Zynga reportedly has 250 million regular players of its free games, including 90 million monthly users of CityVille, which was launched just six months ago.

Zynga makes money by offering players "game credits" that can be purchased via credit card or PayPal, much as players of arcade games can continue playing by dropping more quarters in the slot. Zynga players also can get game credits by purchasing services or taking surveys from Zynga partners.

The company reportedly is on track to make $630 million in profits this year on revenue of $1.8 billion. According to the New York Post's Garett Sloane, Zynga has narrowed down the lead underwriter to Morgan Stanley or Goldman Sachs, though his sources say Morgan "may have a slight edge."

Zynga's latest fund-raising round of $500 million pegs its value in the area of $10 billion, higher than LinkedIn's. Here's what Eric Savitz says over at Forbes.com:

Let’s say for the sake of argument that the company comes public at 30x trailing revenues – expensive, I know, but LinkedIn trades for 36x trailing revs, and doesn’t make any money, so humor me – and let’s assume that the $850 million revenue number is real. You’d get a company with a $28 billion market cap. That would make Zynga worth more than Electronic Arts, Activision, Take-Two and THQ combined.

Consider yourself humored, Eric.

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