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Is Zynga Looking For A Final Payoff Before They Sell Company?

Zynga has hired Goldman Sacks to handle, what could be, one of the largest IPO’s in the history of Wall Street. The question of the day among potential investors & financial experts alike is whether or not Zynga is doing this just so they can make one get one final payday before they sell the company.

That seems to be the thinking of many unnamed sources close to this IPO. Many feel based on Mark Pincus’s history & time lines,  with the companies he starts, that he is ready to move on. Also with all the major game issues, drop in players and revenues it is thought he is looking for a final payoff before the value is gone.

Zynga still remains the King of Social Gaming and many start up game companies have used Zynga as a model for their companies. While Zynga still has tremendous value in the market place, the shine with the company is dulling a bit. And now the potential underwriters are now looking closely at the numbers after some issues were brought to light to them that they say Zynga failed to disclose to them.

Zynga’s IPO will still be huge but it will not be nearly as big as the industry thinks, especially now that they are looking at the new information provided to them. They are now taking a very serious look at things and the valuation might now become much lower than what was first predicted.

It seems they were not told of the major drop in with the daily players and the potential revenue drop that comes along with it. An unnamed managing partner of Goldman Sachs has admitted that Zynga’s game Mafia Wars, while not the biggest game anymore, still does provide the most revenue out of all their games. He also goes on to say that Farmville is the game that is talked about most there and those numbers are dropping just as bad as Mafia Wars.

Some of the other financial industry people talked to about this IPO feel Pincus is just looking for his final payoff  and feel the number on what this IPO will bring are really over inflated. They say the 10 billion valuation placed on this should really be around 2.5 to 4 billion instead based on all the data.

So it seems a Linkedin like payoff for Zynga is slowly disappearing according to the growing consensus but it will still be a huge IPO but will now force Wall street to look alot more closely to the all these new social gaming companies and even Facebook who is thinking of going public sometime next year.

Dont be surprised to see Zynga pull something out of their bag of tricks to help increase the value for the company as they are very good at that. I wouldn’t even be surprised to see them come out with a new game to pump up the numbers & help increase revenues thus increasing the valuation toward the potential Labor Day Weekend release of the IPO.

Zynga still makes great, addicting games and they truly do have value, even for a virtual game company.  Even the film & music industry think so or they wouldn’t be doing all these promotions with them. Even with all the game issues and dropping player & revenue numbers.

So who are some of the potential buyers of Zynga if they do decide to sell after the IPO?  I would look for Electronic Arts to be the front runner followed by Sony, as they have the deepest pockets and are building quite a big following with their games. Time will tell first we have to see what happens with the IPO.

May 31, 2011 Posted by | Blogs | , , , , , , , , , | 4 Comments