Zynga Inc. is expected to make a strong debut on the Nasdaq stock exchange on Friday, after the online games maker priced its initial public offering at the top end of a preliminary range but did not increase the size of the $1-billion (U.S.) offering.
The IPO from the online games company has been highly anticipated because it is seen as a way for investors to get a slice of Facebook’s growth before the social network goes public itself.
Facebook is expected to go public next year and the vast majority of Zynga’s free games are played on Facebook.
Zynga sold 100 million shares at $10 per share in the IPO, the top end of the $8.50 to $10 indicative range, according to International Finance Review, a unit of Thomson Reuters. An investor also told Reuters late on Thursday that $10 was the price he was told by one of the IPO’s underwriters.
The company and the lead underwriters on the deal, Morgan Stanley and Goldman Sachs, declined to comment.
Analysts had expected Zynga to raise its price or increase the size of the offering, since demand for shares had seemed strong in recent weeks. The IPO, equivalent to about 11 per cent of diluted shares, values Zynga at $8.9-billion.
“I really thought they’d price it higher. They could have easily raised the size and the price. I expect it to trade strongly when it opens,” said Scott Sweet, an analyst at IPO Boutique.
Zynga’s games are free and it makes money from selling virtual items for players to use in the games.
Others said Zynga probably wanted to play it safe given the volatile financial markets and what happened to another online game company, Nexon, whose shares fell on their first day of trade in Japan this week.
“The number one thing to avoid is a stock that breaks below the IPO price and ideally the shares should rise at least 15 per cent at the open,” said Dan Niles, chief investment officer of AlphaOne Capital Partners. “The market’s been pretty tough this past week, so they probably took a more conservative approach.”
The company, which is the top publisher of popular games on Facebook such as FarmVille and CityVille, had been valued at roughly $14-billion in November, according to an internal estimate in a regulatory filing.
At $1-billion, Zynga’s IPO would still be the largest from a U.S. Internet company since Google Inc. raised $1.7-billion in 2004.