As Facebook IPO date (May 17 or 24) comes near, everyone is getting ready to buy into this most awaited IPO since Google's IPO back in 2004 (same year when Facebook was founded). Only lucky few with connections to Wall Street or big brokerage accounts would get it at pre-IPO prices. Most of common investing public would have to wait to buy it on first day and given reaction to recent tech IPOs, this would most probably open 30-50% or more higher. So how does one participate in this Facebook mania without access to pre-IPO prices. Here is one way:
Based on today's updated S1 filing by Facebook, ZNGA is still major source of revenue for Facebook contributing nearly 15% of revenue. As Facebook devises various schemes to diversify its revenue sources, I expect this to come down to 8-10%. That's still substantial. If we apply same financial matrix, ZNGA should be valued at about 8-10% of Facebook due to similar nature and tight co-dependence on each other. At IPO prices Facebook is being valued at $100 Billion. With about 30% pop on first day, it could be valued near $120-130 Billion at end of first day. Even at 8% of Facebook valuation, ZNGA should be valued at $10 Billion. That means its stock should be around $14 which is where it was trading just few days back. So if you are looking for nice Facebook IPO effect, you may want to consider ZNGA between $8-9 provided you believe in all the hype which would be created by Facebook IPO. Personally I believe that we are in second Internet Bubble (see my last week's blog) at least when it comes to pricing some social startups.
Caveat: Personally I am investor in ZNGA. Do your own due-diligence before investing!
/Shyam
Based on today's updated S1 filing by Facebook, ZNGA is still major source of revenue for Facebook contributing nearly 15% of revenue. As Facebook devises various schemes to diversify its revenue sources, I expect this to come down to 8-10%. That's still substantial. If we apply same financial matrix, ZNGA should be valued at about 8-10% of Facebook due to similar nature and tight co-dependence on each other. At IPO prices Facebook is being valued at $100 Billion. With about 30% pop on first day, it could be valued near $120-130 Billion at end of first day. Even at 8% of Facebook valuation, ZNGA should be valued at $10 Billion. That means its stock should be around $14 which is where it was trading just few days back. So if you are looking for nice Facebook IPO effect, you may want to consider ZNGA between $8-9 provided you believe in all the hype which would be created by Facebook IPO. Personally I believe that we are in second Internet Bubble (see my last week's blog) at least when it comes to pricing some social startups.
Caveat: Personally I am investor in ZNGA. Do your own due-diligence before investing!
/Shyam
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