Zynga (ZNGA) is the star of the week [Sep 9, 2011: Zynga - Virtual Goods, Real Profits], but definitely should have came to market last spring when the hype was hottest (along with Groupon). That said, I expect it to fare better once public than the Chicago based coupon magnet. We also get a new way to play the 'upper income consumer' via Michael Kors. Jive Software is also getting some buzz simply because it's in the super hyped social networking space.
- Eleven firms, including the social-gaming start-up Zynga, are expected to launch as publicly traded companies next week, in potentially the busiest IPO week in four years. Zynga leads the pack as the latest in a wave of social-media initial public offerings. Also drawing attention is Jive Software, a social business-software-platform company, and Michael Kors Holdings, the luxury fashion company.
- If all firms push ahead with their IPOs, it would make next week the busiest since November 2007, when 13 companies made their public trading debuts in a single week, according to Scott Sweet, senior managing partner at IPO Boutique. Sweet noted that next Thursday will be particularly crowded, with six deals expected to launch.
- Zynga’s position among those on deck is a key reason. The San Francisco–based tech company, which is offering 100 million shares at a price range of $8.50 to $10, is set to raise as much as $1 billion. That would make Zynga’s offering the biggest Internet IPO since Google Inc.’s launch in 2004, according to Renaissance Capital.
- In a sign of the growing prominence of social-media IPOs, Jive Software also is expected to enjoy a strong debut. The Palo Alto, Calif.–based company makes software to help businesses set up their own social networks. It had total revenue of $54.8 million for the nine-month period ended Sept. 30 — up 73% from the same period last year. Net losses totaled $38.1 million for the recent nine-month period. Jive is offering 11.7 million shares at a price range of $8 to $10. The stock is expected to begin trading Tuesday.
- Another relatively high-profile IPO for next week is that of Michael Kors Holdings, the fashion design company, which is offering 41.7 million shares at a range of $17 to $19.
- Other companies expected to go public are five oil or energy companies: Bonanza Creek Energy, Sanchez Energy Corp., Mid-Con Energy Partners, Inergy Midstream and Laredo Petroleum. Also going public are Luxfer Holdings, a materials technology company; FusionStorm Global, which offers information technology hardware, software and services to businesses; and GSE Holding, a maker of containment products in mining, waste management and environmental protection.
More on Zynga here as we have updated financial information; revenue growth impressive but profits actually shrinking as costs skyrocket. I'd expect a nice pop upon IPO however:
- For its IPO, Zynga said it plans to sell 100 million shares at a price range between $8.50 and $10 per share. Underwriters have been granted an additional 15 million shares to cover over-allotments. The company said in its updated filing with the Securities and Exchange Commission on Friday morning that it expects to have about 699.4 million total shares outstanding following the debut, which includes Class B and C shares that won’t be offered to the public.
- That would give the company a total market value of about $7 billion — if the offering was priced at the high end of its expected range. Previous valuation targets leaked to media outlets had the number around $10 billion.
- Scott Sweet of IPO Boutique said Zynga’s anticipated valuation is “significantly lower” than previous estimates. He pointed to the recent debuts of Groupon and Angie’s List— both of which are trading at or below their IPO prices just weeks following their debut. “Certainly the weakness post-IPO of Groupon and Angie’s List has cast a pall on the sector,” Sweet said in an e-mail. (why Angie's List is being compared to these other companies is beyond me....)
- Even so, a market cap of $7 billion would put Zynga relatively on par with Electronic Arts, one of the largest video game publishers in the market. Sweet also noted that neither founder Mark Pincus nor key venture capital backer Kleiner Perkins are selling shares in the offering, which he said would likely be a “big selling feature” for the deal.
- Zynga makes games played primarily over Facebook. Popular titles have included “CityVille,” “FarmVille” and “Mafia Wars.” The company said in its filing on Friday that it now has about 227 million average monthly users, which play the games for free and purchase items through micro-transactions within the games that makes up the bulk of the company’s revenue.
- For the nine months ended Sept. 30, Zynga claimed total revenue of $828.9 million — more than double the $401.7 million in revenue from the same period last year. Net income for the recent period was $30.7 million, down from $47.6 million in the comparable period thanks to a sharp rise in marketing and R&D expenses.
- Zynga plans to trade on the Nasdaq under the ticker symbol “ZNGA.” It plans to use the proceeds from the offering for general corporate purposes and possibly acquisitions. About $83.6 million will go towards satisfying tax withholding obligations related to the vesting of restricted stock units.
[Jun 29, 2011: Zynga Could File for IPO as Early as Today]
[May 25, 2011: Sources - Zynga Ready to File for IPO]