Zynga set for $7-10bn listing – five things you never knew about the social gaming giant

The tech IPOs of 2011 have continued, with social gaming company Zynga updating its filing over the weekend to confirm it will offer 100 million shares with a starting price of between $US8.50 and $US10, in order to raise as much as $US1 billion.

Based on the higher share price, Zynga would be valued at $US7-10 billion. That’s down from earlier reports of a valuation between $US15-20 billion, but it was also reported on TechCrunch the company had dropped its price range.

But despite the change, Zynga’s filing will certainly be a highlight in a year when tech companies have seen their valuations skyrocket.

Here are five things you probably didn’t know about Zynga and its fascinating founder, Mark Pincus.

One of the few with a profit

A strange trend has been occurring where tech companies that have filed for IPOs haven’t been expected to turn a profit. Groupon is yet to become profitable, and Yelp, which has already filed its S1, isn’t profitable yet either.

Zynga is one of the few that is actually making money. In the third quarter, revenue was $US306 million, up by 80% from the previous corresponding period. Net income was $US12.5 million.

That having been said, that profit was down 50% from the previous corresponding quarter. But investors will be relieved to know Zynga is actually able to make some cash.

Mark Pincus is a real estate investor

A couple of things you may not know about Zynga’s co-founder and chief executive, Mark Pincus – he’s a potential billionaire, and a very, very smart real estate investor.

Back in 2007, Pincus actually bought a factory to house the company. And based on reports in the Wall Street Journal, he paid $US2.2 million for it.

Last year, Pincus paid $US500,000 last year to lease office space that he actually owns, Rental income came to $US400,000, and based on current rents, Pincus could actually earn back half the price in a few years.

That rental income also comes to more than Pincus’ own salary.

Earlier this year, Pincus was put on the Forbes 400 as a billionaire. But due to lower valuations in the tech space, his theoretical wealth has dropped – but not by much.

Pincus won’t be selling any of his own shares next week, but judging on the low-end of the price range, he could be worth over $US770 million. That could reach over $US1 billion if stock rises higher quickly – whether Zynga has any staying power remains to be seen.

A few quick figures on FarmVille

FarmVille has quickly become a phenomenon just two years after being released. Mainly played on Facebook, it also has iOS and HTML5 versions, and has quickly become the biggest Facebook game – and one of the biggest games out of any genre.

The game has over 39 million active users, and achieved record revenue in the March quarter.

Over time, Zynga says it has started to see a reduction in the amount of money it makes from FarmVille because it has reduced ads. Its money now comes from selling virtual goods to users.

When Zynga goes public, it will be the first company to do so on the back of digital goods. The company doesn’t actually make anything. It creates digital games, and then sells items within those games to make money. But as other social gaming companies follow Zynga’s lead, no doubt there will be more who start listing.

Zynga’s biggest winners

A few of the biggest winners to come from Zynga’s IPO:

• KPCB Holdings, 64 million shares.
• Institutional Venture Partners, 34 million shares.
• Union Square Ventures, 30 million shares.
• Foundry Venture Capital, 34 million shares. (Director Brad Feld is a co-founder of Foundry.)
• Avalon Ventures, 34 million.
• Digital Sky Technologies, 32 million shares.
• Former EA chief creative officer William Gordon, 61 million shares.
• LinkedIn co-founder Reid Hoffman, 3.1 million shares.

The employee share controversy

Zynga has been in a bit of trouble lately. A report from the Wall Street Journal indicated that Pincus had given out shares to employees – but then realised he had given too many.

The company then allegedly started demanding employees give the stocks back, or face being fired. Some underperforming employees were targeted, the reports say, who the directors thought wouldn’t be worth the amount of cash they would earn.

Pincus responded in a company memo by saying the Wall Street Journal had attacked the company, but it isn’t the first time Pincus has been the centre of negative attention. Reports indicate he can be a ruthless leader, often berating employees.

The practise of asking for shares back resulted in a couple of settlements, the report claims. But they weren’t forced to give up all the shares – and no doubt are about to reap the benefits.