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Experts: Zynga's IPO an offer you should refuseDec 03, 2011 (Boston Herald - McClatchy-Tribune Information Services via COMTEX) -- Zynga joined the Internet IPO game yesterday with plans to raise $1 billion in a public share sale that valued the business at $9 billion and left some Wall Street watchers scratching their heads about the latest Internet stock offering. "To me, this is just not sustainable," said David Smith, chief investment officer at Rockland Trust Investment Management Group. "I don't get the valuation. These things feel just like the dot-coms in 2000." The San Francisco-based company behind Facebook games "Farmville" and "Mafia Wars" said in a regulatory filing that it expects to sell 100 million shares at $8.50 to $10. A Zynga source pointed to Dec. 15 as a likely target for its IPO pricing, following a "roadshow" that will bring executives to Boston to drum up investor interest. Zynga has about 30 employees at an office in Cambridge's Harvard Square where it developed the game "Adventure World." The company declined to comment on its IPO filing. The plan is actually smaller than Zynga's expectations in July when it first filed IPO paperwork. The lower valuation means paper losses for early investors including Fidelity Investments. Smith said the string of Internet IPOs -- LinkedIn, Pandora, Groupon -- have been set up to create a splash by restricting the amount of shares for sale, among other methods. "Caveat emptor," he said. "The smart money gets in at the offering price -- and then flips it." Peter Cohan, a Babson College lecturer and management consultant, said questions persist about Zynga's business. "The value is ridiculous, because the growth of Zynga is slowing down," he said. "Not only that, it's getting less profitable. And they're completely dependent on Facebook for revenue. You never want to depend on one customer." Securities lawyer Andrew Stoltmann called the Zynga IPO "another clone." "It looks really risky, really speculative," he said. "All but the most sophisticated investors should steer clear." Playing the market: Zynga, the company behind games on Facebook such as "Mafia Wars" and "FarmVille," hopes to harvest some cash through a $1 billion initial public offering, announced yesterday. Founded in 2007 by CEO Mark Pincus, Zynga has 2,300 employees. The company is profitable but earnings are volatile because it has to spend on new online games. Zynga execs kick off an investor roadshow Monday, with stops in major cities including Boston. Zynga is the latest in a spate of IPOs by Internet companies this year. Here's how their shares have fared: LINKEDIN May 19 IPO price: $45 Yesterday's close: $67.89 Change: +51% PANDORA June 14 IPO price: $16 Yesterday's close: $10.78 Change: --33% GROUPON Nov. 3 IPO price: $20 Yesterday's close: $18.95 Change: --5% Source: Associated Press; Reuters; Yahoo Finance [email protected] ___ (c)2011 the Boston Herald Visit the Boston Herald at www.bostonherald.com Distributed by MCT Information Services |