Zynga Confirms Its Billion Dollar Public Offering
Zynga is set to begin trading tomorrow morning, having achieved a $1 billion initial public offering.
This evening, the San Francisco company confirmed that it priced at the high end of its range by selling 100 million shares at $10 apiece. Shareholders also granted the underwriters a 30-day option to purchase up to 15 million additional shares if there is more demand. That will bring the total to $1.15 billion; however, Zynga will not receive any of the proceeds from those additional shares.
Zynga had been seeking to sell 100 million shares at between $8.50 to $10 each. By hitting the high end, it easily becomes the largest Internet IPO in the U.S. since Google in 2004. The company will now be worth around $7 billion, which is in line with other publicly held game companies, such as Electronic Arts.
But tomorrow will be the true gauge, once the company starts trading freely on the Nasdaq under the ticker symbol ZNGA. It is looked at as favorable if the stock jumps right out of the gate; if trading is more modest, it could signal that Zynga was priced fairly.
What is particularly stunning is the global appetite for game companies. Earlier this week, Tokyo-based Nexon went public on the local stock exchange, also raising $1 billion at the same valuation of $7 billion.
Investors and employees in particular will be banking on Zynga’s price to pop tomorrow. Earlier this year, the company sold shares to investors for $14, roughly 30 percent higher than the $10 price. Some employees’ stock options are rumored to be issued at even higher prices.
The worst-case scenario is that the stock falls. In November, Groupon shares jumped by 40 percent on the first day of trading, increasing to as much as $30 from the intial $20 pricing. But by the end of the day, the share price settled down at $26, and in subsequent weeks, fell to as low as $15.
Nexon’s stock fell modestly in next-day trading; however, that was largely blamed on a weak economy.
The social games leader, known for FarmVille and other franchises like Words With Friends, may have decided to price its offering modestly to avoid scenarios like that.
Already, it is choosing to do things a bit differently. Zynga won’t be flying to New York to ring the opening bell, as is customary.
Instead, the company’s founder and CEO, Mark Pincus, will ring the bell remotely from its brand-new San Francisco headquarters, where the Nasdaq has set up a temporary bell. Pincus will be joined by the company’s management team, board member Bing Gordon and Pincus’ wife, Alison Pincus.