Zynga hits market with $1B IPO

December 16, 2011

Zynga released the official pricing for its shares late Thursday, offering 100 million shares a $10 a pop. That means it hits the Nasdaq with a $1 billion offering, making it the largest technology IPO since Google.

The game company will trade under the ticker ZNGA.

Speculation about Zynga’s IPO has been flying for months now, but the company goes into its market debut with some possible clouds on the horizon.

Zynga has been working hard on establishing its brand outside of Facebook, but there’s no denying that the relationship is vital to the company’s survival right now. The company acknowledged this in its own S-1 filing with the Securities and Exchange Commission, saying that if it’s unable to “maintain a good relationship with Facebook,” the company could suffer.

That’s one point brought up by Sterne Agee analyst Arvind Bhatia, who rated Zynga an “underperform” on Dec. 13, in his list of bear arguments on the stock, pointing out that 94 percent of the company’s revenue is generated through the social network.

In an analyst note, he said that “a slowdown or disruption in the growth of Facebook, or Facebook policy changes, will negatively impact Zynga” and that despite the large number of people playing Zynga’s games, it seems that there’s a very small number of people who are actually paying the company.

He also wrote that he doesn’t believe Zynga has a sustainable business model in general. There’s a low barrier to enter the social gaming space, he said, and Zynga’s games seem to cannibalize one another for the same audience.

Zynga has been taking steps to stand on its own, prepping its own gaming platform and releasing games that go beyond its “Ville” and “Mafia Wars” formulas. The company got a publicity boost from Alec Baldwin’s tiff with American Airlines over the actor’s addiction to its game “Words with Friends,” but only time will tell if it can keep that momentum going.

Related stories:

‘FarmVille’ creator Zynga seeks sweet harvest with initial public offering of $10 per share

Alec Baldwin’s ‘Words with Friends’ obsession gives Zynga a boost

Venture Beat: How Zynga grew from gaming outcast to $9B social game powerhouse

Hayley Tsukayama covers consumer technology for The Washington Post.
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