Zynga is set to go public in two weeks. In the meantime, the online game company is taking steps to make sure that its IPO doesn’t suffer the same fate as fellow technology stocks Pandora (NYSE: P) and Groupon (Nasdaq: GRPN).
Both those stocks went public earlier this year to considerable hype only to see their shares drop below their IPO prices shortly thereafter. Zynga is trying to learn from Pandora and Groupon’s IPO mistakes. It started today by slashing its value from $14.05 billion to $9 billion – an effort to insure that its stock isn’t grossly overvalued like its tech stock predecessors when they went public.
Zynga’s IPO is scheduled to price on December 15 and begin trading on the stock market the following day. The company’s IPO plans are ambitious: It hopes to raise $1 billion. That would significantly outpace the $700 million Groupon raised in its initial public offering, and make Zynga the largest IPO by a tech stock since Google (Nasdaq: GOOG) raised $1.7 billion in its 2004 debut.
To get there, Zynga will offer a much higher percentage stake in itself than Groupon did. The company plans to sell 100 million shares, which would translate to an 11.1% stake – more than double the measly 5.5% shares of itself that Groupon offered in its IPO. Zynga’s expected price range is between $9 and $10 a share, according to the IPO website RenaissanceCapital.com.
Zynga is a five-year-old company whose viral games are prominently featured on the social network Facebook. The games are free, but the company makes money by selling virtual items such as weapons that people who play the games can buy. Unlike Groupon and Pandora, the company is profitable, raking in $30.7 million in the first three quarters of 2011. However, its earnings in the most recent quarter were down 54% from the same period a year ago.
Zynga will begin trading on the Nasdaq under the ticker symbol “ZNGA”.