Zynga shares rise after very successful IPO

ZYNGA, THE largest maker of games for Facebook’s website, advanced as much as 15 per cent in its first day of trading after raising $1 billion in its initial public offering.

The shares, listed on the Nasdaq Stock Market, gained 9.9 per cent to $10.99 at 11.05am New York time after rising as high as $11.50.

The developer of games such as CityVille, FarmVilleand Mafia Warssold 100 million shares for $10 each, the top end of an $8.50 to $10 range, Zynga said in a statement.

The offering is the biggest by a US internet company since Google raised $1.9 billion in its 2004 IPO.

Zynga’s increasing ubiquity and expansion prospects appeal to investors, according to Colin Sebastian, an analyst at Robert W Baird and Co.

“Zynga and its games are becoming consumer brands, and there is a lot of recognition for growth potential,” he said.

Founded by chief executive officer Mark Pincus in 2007, Zynga doubled sales to $829 million in the first nine months of 2011. The IPO valued Zynga at as much as $7 billion, or 6.8 times annual revenue. That’s more than three times rival Electronic Arts (EA) price relative to sales over the same period.

EA bolstered its own online services by purchasing PopCap Games this year. EA, the maker of The Simsand Scrabblefor mobile devices has a market value of about $6.9 billion.

Nexon, a Tokyo-based maker of games for Facebook including Zombie Misfits, started trading this week after raising $1.2 billion in an IPO, Japan's biggest this year. "You're definitely going to see more competition" for Zynga as other companies expand their user bases, said Richard Greenfield, an analyst at BTIG. "On the other hand, I think it's also going to bring more people into the overall social gaming space."

Zynga planned to offer 14 per cent of its common stock. That compares with less than 10 per cent for companies including Groupon, LinkedIn, and Pandora Media, which made public debuts this year. Internet firms have used smaller free floats to boost initial demand for their stock. Zynga sold all shares in the IPO, and plans to use proceeds for game development, marketing and corporate purposes. – (Bloomberg)