Eric Tilenius, general manager of Zynga, didn’t have many kind words to say about the sudden surge in stock value that accompanied the release of Linkedin’s IPO. As SanJose.com noted, he commented that, “A huge opening-day pop is not a sign of a successful IPO, but rather a massively mispriced one.” According to some commentators, Linkedin’s underwriters underpriced the company intentionally so as obtain earn greater earnings for their favored clients. They say that Linkedin lost out on $175 million as a result.
That’s something Tilenius wants to avoid, given the appetite that investors have for the greatest hits of Web 2.0. With 250 million people now playing Zynga games online, rumors are circulating that the makers of Cityville, Farmville, and Mafia Wars are ready to release their own IPO. Filing with the Securities and Exchange Commission may even come as early as this week, though next week is considered to be more likely.
Investors are likely to jump on board. The company was recently valued at $10 billion, and if Linkedin’s experiences are any indication, that could double with the release of an IPO (on the other hand, Tilenius does believe that Linkedin was underpriced). It is also a large and growing company. With 250 million people playing its games, it has earned a reported $850 million in revenues, of which $400 million was profit. This year it is expected to bring in $1.8 billion in revenues and $630 million in profits. And it is growing fast, having more than doubled its workforce last year alone.
One unnamed sources claims that Zynga representatives have already met with Morgan Stanley and Goldman Sachs to decide who will best represent them as underwriters for the stock offering.
Goldman Sachs seems more likely, given Tilenius’s comments about Linkedin, where Morgan Stanley was one of the underwriters. On the other hand, the New York Post believes that Morgan Stanley’s success with Linkedin may give it the edge that Zynga is looking for. They say that the initial public offering could come as early as June.
One question being asked is whether the launch of an IPO signifies an emerging trend among Web 2.0 hotshots. The success of Linkedin’s IPO last week was quickly followed by the release of an IPO for Russian search engine giant Yandex. That brought the company $1.3 billion in what is described as “the largest technology offering since Google’s $1.7 billion market debut in 2004.”
Could Zynga be the third in a trifecta?