Dec. 10 (Bloomberg) -- Zynga Inc. said the valuation it’s seeking in an initial public offering is 50 percent less than an August fair value estimate after it took into account recent IPOs that have underperformed.
The price range of $8.50 to $10 a share is based on “a review of the offering price and recent aftermarket performance of companies that completed IPOs in 2011,” the company said in a regulatory filing yesterday.
The top end of Zynga’s offering range would value the company at $7 billion, or half the $14.1 billion it said represented its fair value as of August. Groupon Inc., the Chicago-based provider of online coupons, raised $805 million in its IPO last month including an over-allotment option. The shares surged as much as 31 percent in the first weeks of trading before plunging as much as 42 percent from their high.
Angie’s List Inc., the Indianapolis-based operator of a consumer-reviews website, raised $132 million in its IPO last month, including an over-allotment. The shares tumbled as much as 29 percent from a high in public trading.
Groupon and Angie’s List both have recovered this month. Groupon closed yesterday at $23.48, 17 percent above its offering price. Angie’s List closed at $16.03, 23 percent higher than its IPO price.
San Francisco-based Zynga’s offering of 100 million shares, set to price on Dec. 15, would be the biggest by a U.S. Internet company since Google Inc. went public in 2004, Bloomberg data show. Zynga may raise about $889 million in the share sale to spend on developing new games and possibly buying companies or technologies, according to its filing.
Zynga had originally planned to seek a higher market value in its IPO, and scaled back after Internet companies including Groupon sank following their debuts, a person with knowledge of the plans said this month. Zynga said its IPO price “was not determined using the methodology used by management and the third party valuation firm to value our stock in August.”
Investors have already put in enough orders to cover all the stock being offered, people familiar with the matter said Dec. 8.
Morgan Stanley and Goldman Sachs Group Inc. are managing the IPO. Zynga’s shares will trade on the Nasdaq Stock Market under the symbol ZNGA.
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