Zynga Adjusts Valuation from $10B to $7B — Will the Market Buy It?

Zynga’s regulatory filing this morning shows that Zynga is preparing to offer 100 million shares at between $8.50 and $10.  This could possibly net them up to $1 Billion if all goes well, and would price their entire company’s full worth at around $7 Billion, which is far lower than the $20 Billion that was suggested when Zynga first hinted at an IPO.

The question is whether this valuation, which puts their trailing revenue multiple at around 7x on revenues of close to $1 Billion, is still expensive.  As mentioned in yesterday’s analysis, EA sits around 2x and ATVI around 3x, which makes Zynga a more expensive and potentially risky stock.  It all depends on how strong you think Zynga will perform in the next few quarters, and what your exit strategy will be.

Kim Mai Cutler at our sister site Inside Social Games does a more detailed analysis of the potential IPO, so if you’re considering investing take a look over there first and let us know if you’re planning to buy in.