Social game company Zynga has finally filed for an IPO to raise $1 billion, which may be one of the biggest IPOs of the year. As CNBC reported earlier this week, Morgan Stanley and Goldman Sachs are the company's lead underwriters, with Merrill Lynch, Barclays and Allen & Co. also participating.
Zynga is expected to be valued between $15 billion and $20 billion. The company was profitable last year, and its revenue is growing fast, but the S-1 does reveal some points of weakness, including the fact that its daily average users have declined over the past year.
Zynga is a whole new type of gaming company—its revenue comes from the sale of virtual goods to help play its hit games, which include FarmVille and CityVille.
The company's revenues were $597.5 million in 2010, up from $121.5 million in 2009, and its quarterly revenue growth is accelerating, with $235.4 million in the first quarter of 2011.
The company is profitable, with a net income of $90.6 million last year, or $27.9 million attributable to common stockholders. In the first quarter, total net income came in at $11.8 million, but the company broke even in terms of net income attributable to common stockholders. The company has $1 billion of cash and cash equivalents on its balance sheet.
The company's sheer reach is striking: it had 62 million average daily active users last quarter and 236 million monthly active users. But those numbers actually dipped over the past year—a year ago the company had higher average daily active users—67 million, and exactly the same average monthly users. And in the interim three quarters, both metrics dipped.
Zynga's risk factors center on its relationship with Facebook. The company said, "If we are unable to maintain a good relationship with Facebook, our business will suffer."
The game company is under pressure to diversify its player base and games. It added, "we rely on a small percentage of our players for nearly all of our revenue" and "a small number of games have generated a majority of our revenue and we must continue to launch and enhance games that attract and retain a significant number of paying players."
We're still waiting for more info from Zynga—how much of its stock it's looking to float; the valuation; and the ticker symbol. This is a much bigger company than LinkedIn, though at a $20 billion valuation, technically cheaper. LinkedIn is still trading at roughly double where its stock priced, which might mean Zynga's numbers could be huge.
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