Zynga seeks lower IPO value in tough market

Fri Dec 2, 2011 5:16pm EST
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By Liana B. Baker and Brenton Cordeiro

(Reuters)- Zynga Inc is seeking a more modest valuation than Wall Street expected for its initial public offering, hoping to attract investors after a series of Internet stocks fell below their IPO price in recent weeks.

The social games maker, known for Facebook games like "FarmVille" and "Mafia Wars," plans to sell 100 million new shares between $8.50 and $10 each, which will raise $925 million based on the midpoint of the range, according to a regulatory filing on Friday.

The deal values Zynga at as much as $9.04 billion, about a third less than the $14.05 billion valuation that the company cited in a filing two weeks ago.

"Given what's transpired in the markets over the several months and overall macro uncertainty, it seems like Zynga is trying to take a practical and prudent approach to the deal to make it seem more appetizing to investors," said Robert W. Baird & Co analyst Colin Sebastian.

Shares of high-profile Internet companies such as Groupon Inc and Pandora Media Inc have crashed below their IPO price, casting a shadow over other Web startups hoping to tap public markets.

At $925 million, Zynga's IPO would still be the largest from a U.S. Internet company since Google Inc raised $1.7 billion in 2004. Zynga is selling 11.1 percent of diluted shares in the offering.

The IPO has been hotly anticipated because it would be the first chance for most investors to get a piece of Facebook's growth, since the vast majority of Zynga's games are played on the social network. Facebook plans to go public in 2012.

But analysts say Facebook's user growth is slowing, and that has a knock-on impact on Zynga.   Continued...