Bloomberg News

Zynga Shares Jump After Facebook IPO Filing: San Francisco Mover

February 06, 2012

Feb. 3 (Bloomberg) -- Zynga Inc., the biggest developer of games for social-networking sites, climbed 26 percent in two days, boosted by Facebook Inc.’s initial public offering filing.

The shares rose 8.1 percent to $13.39 at the close, bringing their year-to-date gain to 42 percent. The stock got a lift after Facebook reported that 12 percent of its revenue comes from Zynga, which makes such games as “CityVille” and “Texas HoldEm Poker” for the site.

Facebook’s IPO prospectus -- which helped bolster other Internet stocks, including Groupon Inc. and Renren Inc. --showed how reliant the social network is on Zynga, said Colin Sebastian, analyst at Robert W. Baird & Co. in San Francisco.

“Seeing in black and white that Facebook and Zynga have this close relationship is meaningful,” said Sebastian, who has an “outperform” rating on Zynga shares, which he doesn’t own himself. It means Facebook “wants Zynga to do well,” he said.

While Facebook depends on Zynga, Zynga is far more reliant on Facebook. The game developer gets more than 90 percent of its revenue from the social-networking site. Users buy Facebook Credits in Zynga games, with Facebook keeping 30 percent of sales from the transactions.

Facebook made $188 million from payments and other fees in the fourth quarter of last year, a jump of 21 percent over the preceding quarter. That growth could be a sign Zynga will beat estimates for fourth-quarter sales when it reports earnings this month, Sebastian said.

“That’s a good number,” he said. “That’s certainly a lot more than what anyone had modeled for Zynga’s quarter-over- quarter growth.”

Zynga’s stock has climbed six days in a row, giving it a bigger bump than when the shares debuted in December. The shares declined in their first two days of trading, falling 10 percent, followed by two days of small gains.

--Editors: Nick Turner, Cecile Daurat

To contact the reporter on this story: Douglas Macmillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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