Zynga Boosts Amount it May Raise in IPO to $1.15B at a $5.9 to $7B Valuation

Zynga boosted the amount it may raise in its upcoming initial public offering to $1.15 billion with a potential valuation of between $5.9 and $7 billion, according to a new amendment to its SEC filing today. The capital it may raise is $150 million higher than the $1 billion it originally said would be the maximum size of the offering when it filed in July. The IPO is on track to happen in two weeks during the week of Dec. 12.

As was reported earlier this week, Zynga lowered its prospective valuation further. At $8.50 to $10 a share and with 699.4 million total outstanding shares, the company would be valued at between $5.9 and $7 billion. That’s lower than the $15 to 20 billion range the company reportedly originally sought. It’s also less than half the $14.05 billion valuation that a third-party Zynga hired back in August put the company’s worth at, according to the filing.

With Zynga on track to make around $1.1 billion this year, a $15 to $20 billion valuation would have proved to be a high revenue multiple compared to other publicly-traded gaming companies like Electronic Arts, which has a market capitalization that’s roughly twice its trailing twelve-month revenues. Zynga lower the valuation because of the market backdrop, according to a source knowledgeable about the company’s deliberations. Not only have offerings from Angie’s List and Groupon been weaker than expected, investors are speculating about the stability of the euro by driving up borrowing costs for weaker economies in the European Union.

Zynga has also posted a 30-minute video of its roadshow here. In the video, the company emphasized that Zynga’s games tend to peak in revenues long after they’re launched. They pointed to Farmville, which reached a peak in bookings about two years after it was released. Coupled with the fact that the last six months have been a busy launch period, Pincus says this lays the groundwork for near-term growth even as daily active users have declined for two consecutive quarters.

He also pointed out growth on mobile platforms where Zynga has 11.1 million daily active users, up from 991,000 thousand a year earlier. Android and iOS are likely to be the most promising way for the company to diversify off Facebook, where it earned 93 percent of its revenue in the most recent quarter.

We didn’t pick up much that was new with the filing, excepted an attached letter showing that several of Zynga’s minority investors including Google, Russia’s Digital Sky Technologies and Union Square Ventures also expect to be selling about 15 million shares, or up to $150 million at the high end of Zynga’s pricing range. Google owns 23.3 million shares in the company, or about $233 million at the high end of Zynga’s price range.

Zynga has made $30.7 million in net income on $828.9 million in revenue through the third quarter of this year. That’s up from $401.7 million in revenue during the same time a year earlier. Net income, however, has declined from last year’s $47.6 million through the third quarter as Facebook levied a 30 percent tax through Credits and Zynga invested in research and development for new games. Zynga expects to spend about $50 to 70 million this quarter on network infrastructure, for example.

The company is selling 100 million shares of Class A stock, with an extra allotment of 15 million shares if there is demand. Keep in mind that Zynga has a three-class stock structure, where Class B shares have seven times the voting power of Class A shares. Class C stock — which are wholly owned by chief executive Mark Pincus — have 70 times the voting power of Class A shares. The company is structured so that the Class B and Class C shares, which investors in this IPO have no access to, hold 98.2 percent of the voting power.

Confirmed: EA Acquires KlickNation, Source Says Price is Roughly $35M

Electronic Arts said it acquired KlickNation to beef up its RPG games on social networks after we broke the news about the deal yesterday. The Sacramento, Calif.-based company will become part of BioWare’s social gaming team.

EA says the studio will focus on role-playing games for social networks and will be led by KlickNation’s chief executive Mark Otero. The terms of the acquisition were not disclosed, but a source tells us that the total price was roughly $35 million, including earnouts and retention bonuses. KlickNation’s games also probably won’t be sunsetted even though they have seen a slight slip in active usage over the past month.

In acquiring KlickNation, EA enters the emerging core gamer market on Facebook, which is currently dominated by strategy combat games like Kixeye’s Backyard Monsters and IGG’s Galaxy Online 2. CrowdStar and RockYou recently joined this market with their own strategy combat titles released in the last three months.

KlickNation is a relatively small developer compared to other studios producing core strategy games. According to our AppData traffic tracking service, the developer at one point enjoyed 1.3 million monthly active users, and saw around 150,000 daily active users at its peak. Today, the developer sees 395,441 monthly active users and 49,022 daily active users.

ETA: Although we’re reasonably certain that EA is working on a companion social game for BioWare property Mass Effect 3, we don’t believe that KlickNation is working on that project. Given the console game’s March 2012 release window, it would be a very tight development cycle for a fully realized companion social game. BioWare also has a back catalog of IP to pull from (Baldur’s Gate, Jade Empire, etc.) to develop all-new social games.

AJ Glasser contributed to this story.

Zynga to Lower Prospective Valuation to $10B For IPO Amid Economic Uncertainty

Zynga is eying a lower valuation of around $10 billion for a public offering expected in about two weeks. Reuters first reported the news, and we confirmed the details they reported with a source knowledgeable about the company’s plans. Zynga declined to comment.

Zynga expects to raise about $900 million with a price of roughly $8 to 10 a share. A $10 billion valuation would be lower than the company’s most recent valuation of $14.05 billion as estimated by a third-party firm Zynga hired in August, according to their most recent SEC filing. An updated filing is expected toward the end of the week with a pricing range for the shares.

The change was done to reflect the quickly changing market conditions as instability the European Union rattles investors, according to the source. They said it wasn’t a reflection on the fundamentals of the business.

Comparable publicly traded gaming companies like Electronic Arts have a market capitalization of $7.75 billion while Activision Blizzard Inc has a valuation of $14.15 billion. A $10 billion valuation would be about ten times what Zynga is on track to make this year at around $1.1 billion or more. Electronic Arts, in contrast, trades at about two times its trailing revenues.

Such a multiple would imply that investors expect significant growth in Zynga’s future even as its base of daily active users has shrunk for two consecutive quarters. With a series of new releases this quarter like Castleville, Dream Zoo and Mafia Wars 2, the company is trying to prove that it can keep its Facebook users engaged while finding new growth opportunities on mobile.

It also looks like Zynga may move in the direction of supporting third-party games after the company poached Sony executive Rob Dyer to become its head of partner publishing. We’re also hearing that Zynga is engaged in early-stage M&A talks with Tapjoy, a move that would give it broader distribution on iOS and Android.

Tapjoy Actively Explores a Sale With Zynga, Japanese Giants DeNA & GREE as Candidates

Tapjoy, which works with developers to distribute and monetize their apps, is actively exploring a sale, according to several sources with knowledge of the company’s discussions. Possible candidates include Zynga and the Japanese mobile gaming giants GREE and DeNA.

The company’s chief executive Mihir Shah denied that the company was for sale. “I can’t comment on rumors or speculation.”

He added, “We’re at a level of scale and the market opportunity is so large and we’re so clearly in the lead that there isn’t really any direct viable competitor. We just continue to be focused on building this ridiculously exciting business.”

However, sources familiar with the company’s discussions say it has been actively pursuing talks with strategic acquirers like Zynga, Electronic Arts, GREE and DeNA and that it has been filling out its executive ranks ahead of either a sale or a public offering. The company did hire a chief financial officer in July named Al Wood who had led two companies through the IPO process.

Read the rest on our sister site, Inside Mobile Apps.

EA to Acquire KlickNation as it Moves Into Core Gaming on Facebook

Electronic Arts may announce tomorrow that it has bought Age of Champions developer KlickNation, according to sources familiar with the matter. The terms of the deal will likely not be disclosed. KlickNation has around 70 employees and has at least one angel investor, Robert Simon of Ariva Partners.

KlickNation would add a core gamer-focused studio to the two social gaming ones the company currently has in Dragon Age Legends developer EA2D and Playfish. These two studios mainly produce social games related to EA’s existing franchises like Dragon Age, The Sims and FIFA. Playfish also maintains the original intellectual property it created like Restaurant City before it was bought in 2009 for $300 million in cash and stock plus $100 million in earnouts.

In acquiring KlickNation, EA could be entering the emerging core gamer market on Facebook, which is currently dominated by strategy combat games like Kixeye’s Backyard Monsters and IGG’s Galaxy Online 2. CrowdStar and RockYou recently joined this market with their own strategy combat titles released in the last three months.

KlickNation is a relatively small developer compared to other studios producing core strategy games. According to our AppData traffic tracking service, the developer at one point enjoyed 1.3 million monthly active users, and saw around 150,000 daily active users at its peak. Today, the developer sees 395,441 monthly active users and 49,022 daily active users. In the last month, all of its major games — including its newest game, Six Gun Galaxy — have flattened in monthly and daily actives, a sign that KlickNation may be preparing to sunset the games after the acquisition is announced in the same way that DNA Games did when bought by Zynga.

AJ Glasser contributed to this story.

Zynga to Kick Off Its IPO Roadshow Next Week

Zynga will start its investor roadshow next week ahead of a much-anticipated initial public offering. Fortune’s Dan Primack first reported the story, but we’ve confirmed it with a source that’s knowledgeable about the company’s plans. Zynga declined to comment.

The roadshow will start Monday and involve executives like chief executive Mark Pincus, along with chief operating officer John Schappert and chief financial officer David Wehner. We don’t know where the roadshow will happen or to whom the company will be pitching, but a video of Zynga’s presentation will probably become available at some point next week.

We’re also expecting to see an amendment to the company’s earlier IPO filings, likely on Monday that will include pricing.

Just to revisit: Zynga originally filed to raise as much as $1 billion back in July. There are six underwriters on the offering including Morgan Stanley, Goldman Sachs Group Inc., Bank of America-Merrill Lynch, Barclays Capital, JP Morgan Chase & Co. and Allen & Company.

In its most recent quarter, Zynga earned $12.5 million in net income on $306.8 million in revenue, with revenues up 80 percent from the same quarter a year before. However, the company’s number of daily active users have declined two quarters in a row to 54 million users, a negative signal for future earnings growth if Zynga can’t continue to boost its average bookings per user. The company did boost average bookings per user to an all-time record of 5.8 cents per user per day in the third quarter of this year.

The company’s timing is interesting. December is generally the month when many mutual funds rebalance their portfolios, which might potentially open up more capital for the company’s offering. The company’s also coming to market at a time when concerns about the stability of the euro are fueling day-to-day volatility in global equity markets.

Put “-Ville” in a Mobile App Name, Risk Litigation From Zynga

Zynga, the social gaming giant that is famously trigger-happy with litigation, is getting defensive about names ending in “-Ville” on mobile platforms like iOS and Android.

Latman Interactive, a small developer behind a paid hidden object game called Quackville, said it received a noticed from Zynga, asking it to change the name of its game and rescind an application to trademark the name. Zynga declined to comment on this.

However, here’s an e-mail excerpt from a lawyer working on behalf of Zynga to the studio’s chief executive Richard Latman:

To summarize, Zynga is concerned that you have adopted a trademark that shares very close similarity to its popular game names CITYVILLE, FARMVILLE, FRONTIERVILLE, PETVILLE, FISHVILLE and YOVILLE. Your trademark application for QUACKVILLE claims only “downloadable computer game software.” We believe there is a strong likelihood that consumers will confuse QUACKVILLE with Zynga’s –Ville marks, shown above. Therefore, we must insist that you voluntarily abandon your trademark application and game name.

Read the rest on our sister site, Inside Mobile Apps.

Zynga Spent Nearly $20M on Acquiring Four Companies in the Third Quarter

Zynga spent close to $20 million on acquiring four additional companies in the third quarter, an analysis of the company’s amended IPO filings show.

In a filing submitted today that shared the company’s third quarter performance, the company said it spent a total of $40.6 million on buying 13 companies through the end of September. That’s up from $20.8 million it said it spent on nine companies through the first half of the year, in an older filing.

Assuming it was announced right when the deal closed, one of the four companies is known. It might be Toronto’s Five Mobile, which was a gun-for-hire studio that large brands would partner with to build their own mobile apps. That deal was announced in July.

The three others are unconfirmed. New York’s Astro Ape Studios was said to be another acquisition when the company’s executives all changed their LinkedIn job descriptions to that of Zynga employees. But Zynga never confirmed nor denied the deal.

>> Continue reading on our sister site Inside Mobile Apps.

With Android, iOS, Close to 20 Percent of Zynga’s Daily Actives Are Not on Facebook

Zynga said it reached an average 9.9 million daily active users of its games on iOS and Android through the third quarter, according to an amended filing to the Securities and Exchange Commission today.

It means that Zynga is gradually weaning itself off the Facebook platform. Nearly one-fifth of the company’s 54 million daily actives are now on iOS and Android —  which are platforms not operated by Facebook. Keep in mind though, that Zynga’s daily active metric double-counts users who play more than one of the company’s games.

That figure may also make Zynga the company with the most daily actives relative to any other developer on iOS and Android. Storm8 said it had 4 million daily actives on iOS and Android in June. Glu Mobile said yesterday that it had 2.1 million daily actives across its network of games in its quarterly earnings call.

>> Continue reading on our sister site Inside Mobile Apps.

GREE Says it Will Launch New Global Mobile-Social Gaming Platform Using OpenFeint Next Year

After acquiring OpenFeint for $104 million and then bringing in new leadership to run the company, Japanese gaming company GREE says it will launch an entirely new mobile-social gaming platform next year.

The goal is to combine the best parts of the GREE platform in Japan with those of OpenFeint and built a single network that reaches more than 1 billion Asian and Western users. It’s slated to launch by the middle of next year.

GREE, which originally said it would keep its Japanese platform and its Western-oriented side separate, says it’s not taking cues from rival DeNA in building a unified global gaming network.

> Read the rest on our sister site, Inside Mobile Apps.

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