Zynga soars but Facebook has yet to fly
ZYNGA shares jumped 17 per cent yesterday following Facebook’s revelation that 12 per cent of its 2011 revenues came from the social gaming company.
Facebook’s IPO filing on Wednesday also confirmed that Morgan Stanley will lead the troupe of underwriters, who could accept a fee of just one per cent in their keenness to land the deal.
However, at an estimated valuation of $100bn this would still amount to $1bn – a staggeringly large fee compared to other tech IPOs.
According to S&P Capital IQ, Russian search engine Yandex paid its underwriters a sizable £40.3m, while Zynga offered a fee of £20.9m and LinkedIn’s banks earned £15.3m.
But the social network’s ultimate market capitalisation is still under question. While grey traders have hiked Facebook’s value to around $100bn, the company’s financial data and investment risks will undergo great scrutiny in the run-up to its IPO.
Concerns have been raised about the slowing rate of growth at the network, which already has penetration rates of 80 per cent in some countries and 60 per cent in the UK and US, and its heavy dependence on advertising, which is currently not compatible with the fast-growing mobile site.
It also remains to be seen whether Facebook will successfully break into the Asian markets, where other social networks dominate. Facebook reaches less than 15 per cent of Japan and Russia, and is restricted in China.
But Zuckerberg’s power in the company is more concrete. Though he owns a 28.4 per cent stake, he controls 56.9 per cent of voting rights due to the dual class stock and allegiances with early investors. As a controlled company, Facebook is not obliged to have majority independent directors.