/// Zynga’s Valuation Withers 30 Percent Since February

December 3, 2011  |  All Things Digital

Zynga’s initial public offering remains on track to raise $1 billion, but the social games company may not be worth as much as it was hoping for. Earlier this morning, Zynga announced  it will price shares between $8.50 and $10 a share when it goes public later this month. At the high-end of the range that values the four-year-old company at as much as $7 billion. But that’s much lower than than what some investors paid as recently as February, according to documents filed with the Securities & Exchange Commission. In fact, some of its investors are already underwater. One of those investors is Morgan Stanley, which is also one of the company’s underwriters in its IPO. In February, 11 mutual funds associated with Morgan Stanley purchased 5.3 million shares at $14 apiece for a total of $75 million. Four other investors, which were unnamed, also contributed to the round totaling $490 million, according to the document. At $14 a share, the company’s value in February totaled nearly $10 million, or roughly 30 percent greater than today’s high-end of the range. Zynga justified the higher stock price back in February, stating that the U.S. economy had improved and that the public markets were being receptive to Internet stocks, including generous valuations for privately held companies, such as Facebook and Groupon. Furthermore, in March, the company used that valuation as a guide to purchase shares back from five of its early investors and its CEO Mark Pincus at $13.96 a share. While the market conditions have likely changed since then, it’s important to note that things are still in flux. If the company drums up enough demand for the 115 million shares being sold over the next two weeks, the price could move even higher. As Kara Swisher previously reported , Pincus will not sell any shares in the offering, and no other executives at Zynga have plans to sell stock, either. But a number of the company’s early investors will be cashing in. Institutional Venture Partners, Avalon Ventures and Foundry Venture Capital will sell 2.5 million shares apiece for up to $25 million each.

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Zynga’s Valuation Withers 30 Percent Since February

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