Zynga Inc. is seeking to raise as much as $1 billion in the biggest initial public offering by a US Internet company since Google Inc. The company is offering 100 million shares for $8.50 to $10 apiece, according to a regulatory filing today.
The high end of the range would value San Francisco-based Zynga, the biggest developer of games for Facebook Inc., at $7 billion. Zynga had originally planned a larger IPO, scaling back after Internet companies including Groupon and Pandora Media Inc. sank following their debuts this year, a person familiar with the plans said yesterday.
Zynga is selling about 14 percent of its common stock, a larger portion than some Web companies have sold this year in offerings. "It's a reflection of what we've seen in Groupon," said David Dillon, a San Francisco-based portfolio manager at HighMark Capital Management, which oversees about $17 billion.
"If you price yourself too high, you do yourself a disservice in the long term." The top end of Zynga's price range would value the company at 6.8 times trailing 12-month sales, according to the filing. Game maker Electronic Arts Inc. had a market value of $7.73 billion at yesterday's close, or about 2 times sales in the same period, Bloomberg data show.
Facebook may raise about $10 billion in an IPO next year that would value the world's largest social-networking site at more than $100 billion, a person with knowledge of the matter said Nov. 29. Google, operator of the world's biggest search engine, raised $1.9 billion in its 2004 IPO, including an over- allotment option.
Zynga is selling all of the 100 million shares in the offering and expects net proceeds of about $889 million, according to the filing. That would add to a cash pile that totaled $604.2 million as of Sept. 30. If underwriters exercise an option to buy 15 million additional shares in the over-allotment, then venture backer Avalon Ventures would sell the largest portion at more than 2.5 million.
Founder and Chief Executive Officer Mark Pincus, who isn't selling any shares in the offering, will have about 37 percent voting control once the offering is complete. If the over-allotment is exercised, Foundry Group and Institutional Venture Partners would each sell about 2.5 million shares, while Union Square Ventures would offer 2.2 million. Venture firm Kleiner Perkins Caufield & Byers, Zynga's biggest shareholder after Pincus, isn't selling shares in IPO.