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Zynga IPO before Thanksgiving?

According to an article in Financial Times Deutschland, gaming company Zynga is likely to make its highly anticipated debut on the stock market before Thanksgiving (November 24th).

The company is said to investigate a reasonable share price level for its issue. According to previous information earlier this year the valuation could be somewhere between USD 15 and USD 20bn. A $15 billion valuation would mean Zynga is worth 23 times its projected 2011 earnings, which is not unreasonable for such a fast-growing company. Even at $20 billion, the company would be worth “only” 31 times 2011 earnings, which would be high for a mature company with slower growth, but is still reasonable for a fast grower like Zynga.

In March 2011, Zynga was projecting a 2011 profit of $630 million on revenue of $1.8 billion, according to a New York Post report that cited a prospective investor who had seen Zynga’s financials. Zynga makes money by selling virtual currency for use in its games. Users pay to replenish their “energy,” which allows them to participate more fully in games. The company has about 250 million users.

The IPO could potentially turn investor focus towards internet gaming and mobile gaming companies such as Glu Mobile, Majesco Entertainment but also G5 Entertainment. All of them are currently trading below their highs from earlier this year, despite a business model that is recession proved and positive company specific newsflow. G5 Entertainment in particular has come with an extremely encouraging guidance on 2012 and is currently trading at a 12-months forward looking PE-ratio of 7x.

Sincerely,

Nordic Investor

 

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