Zynga has a sky-high implied valuation, and it could wind up being worth much more upon going public. But now isn’t the time for it, as the attendant risks outweigh the hype surrounding the leading social gaming company.
Here are five reasons why Zynga needs to wait before going public.
1. Second Quarter Results Stink
Despite gains in previous quarters, the most recent quarter showed a 95 percent drop in earnings. That’s greater than anything one could blame on Facebook initiating its 30 percent revenue share from Credits.
2. Market Volatility
While this year started off strong for IPOs, potential issuers and banks have been pulling deals amid more recent volatility following Standard & Poor’s downgrade of U.S. sovereign debt.
3. Google Plus Isn’t Enough
While it’s probably shrewd of Zynga to diversify onto mobile platforms and Google Plus, it will take a long time for significant revenues to come in from these additional sources.
4. Bigger Upside Later
Even if Zynga could go public in this market, it would fetch a higher valuation by waiting until markets calm down a bit.
5. Facebook Isn’t Going Public
It might make the most sense for Zynga to follow’s Facebook’s cues with respect to the capital markets.
Readers, when do you think Zynga should go public? If you want to read more before you can answer that question, click here to check out an article on Social Times.