Don’t Expect Zynga IPO in September

The game maker Zynga hopes to raise at least $1 billion in an initial public offering this fall—but don’t expect shares to trade until October at the earliest, say people familiar with the company’s offering plans.

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A variety of obstacles are likely to push the company’s IPO into mid-fall, these people say, including Zynga’s dialogue with the Securities and Exchange Commission, which must approve the offering documents it plans to show investors before it can debut.

In recent weeks, add these people, the agency has asked for clarification of some of the company’s accounting metrics.

A Zynga spokeswoman declined to comment.

Zynga is the latest tech company to encounter interference from the SEC as it strives to sell shares to the public for the first time.

Earlier this summer, the group-discount site Groupon, which hopes to launch a new issue valued at at least $750 million this fall, downplayed a controversial accounting metric known as consolidated segment operating income from its filings amid SEC concerns that it could mislead investors.

And despite the highflying debuts of other tech companies like LinkedIn and Pandora , market conditions for all equities—especially IPOs, which are by nature risky—have cooled considerably this past month.

Zynga’s accounting measures are less worrisome to the SEC than Groupon’s, says one person familiar with the matter, but the agency is nonetheless working to make Zynga’s prospectus as accessible to investors as possible.


One focal point, this person says, has been the game maker’s reliance on a metric called “bookings,” which the company describes in a recent registration document as the total amount of revenue from the sale of virtual goods in games or advertising that Zynga would have pocketed if it could have recorded all the proceeds immediately.

(This differs from the way Zynga handles advertising or game sale revenue, which is typically deferred, or collected over the life of the product.)

Zynga acknowledges in the filing that bookings are not part of generally accepted accounting principles. “This information should be considered as supplemental in nature,” the filing states, and “is not meant as a substitute” for revenue recorded in accordance with GAAP, which is also provided in detail.

The earnings calendar is also a factor for the San Francisco maker of FarmVille, the popular Facebook game.

Since Labor Day falls later than usual this year, a Zynga road show couldn’t launch until Sept. 6 at the earliest, say people familiar with the company’s offering plans, and a two-week process would fall uncomfortably close to Sept. 30 end of Zynga’s fiscal quarter.

Given the timing and the choppy market conditions, these people say, waiting until October or November may make more sense.

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