Social gaming giant Zynga says it intends to raise up to $US1 billion after filing for a float on the New York Stock Exchange, fuelling speculation of a second dotcom boom.
Zynga, founded in 2007 by Mark Pincus, Scott Sale, Kyle Stewart and John Doerr, has become the biggest social gaming company in the world.
Some of its most popular games include FarmVille, CityVille and Zynga Poker.
Zynga, which makes its money from selling virtual goods from within its games, has around 2300 employees, most based in San Francisco.
Zynga intends to raise as much as $US1 billion, the company said in the filing, although that figure could change before the listing takes place, with media reports indicating that Zynga is seeking a valuation between $US15-20 billion.
Sky-high valuations of Zynga and other tech companies have sparked concerns of a bubble, echoing the late 1990s when companies with large online followings but little revenue triggered an investment frenzy that ended in what became known as the dotcom bust.
Foad Fadaghi, research director at market analyst firm Telsyte, says the emerging trend is synonymous with the first dotcom boom, when a lot of companies started to IPO at the same time and he expects it to continue.
“Is it a bubble? It’s certainly showing signs of bubble behaviour,” he says.
“Whether that results in a crash is hard to say because the underlying factors are different from the first dotcom boom.
“There are more established users, technologies, markets and platforms, so it has the potential to be a lot more sustainable this time round.”
Zynga has more than 60 million daily active users, 232 million monthly active users and accounts for two billion minutes of gameplay every day.
Zynga’s IPO is the latest in a wave of high-valued internet IPOs, namely professional social networking site LinkedIn and group buying giant Groupon.
LinkedIn doubled its IPO price in its first day of trading to give it a market value of nearly $US9 billion – the highest for an internet IPO in the US since Google went public nearly seven years ago.
Zynga is expected to attract even greater interest than LinkedIn because its games have become a much larger cultural phenomenon.
The company has a co-dependent relationship with Facebook and probably wouldn’t exist if it hadn’t tailored its games for Facebook’s audience of nearly 700 million users.
“If we are unable to maintain a good relationship with Facebook our business will suffer,” the company has admitted.
It has been suggested that the recent IPO trend could culminate next year in the long-awaited listing of Facebook.