Skip to main content

ZNGA: Proxy for Facebook

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

Comments

Post a Comment

Popular posts from this blog

2026: The Year of Convergence – Melt-up, Moonshots, or Mid-cycle Correction?

Happy New Year! After another period of self-imposed hibernation from the blog—partly due to the festivals, travel, intertia and partly to watch the dust settle on a chaotic 2025—I decided to use the quiet of this New Year’s morning to finally reboot.  Looking back at my October post,  “Clicks to Tokens,”  the hunch about the AI theme held firm. We spent much of 2025 debating whether we were in 1998 or 2000. As we enter 2026, the answer seems to be "neither and both." We have the roaring optimism of the 1920s fueled by "Silicon Spirits," but with the high-speed volatility of the 2020s. So, as the calendar flips, what is in store for 2026? Markets may experience melt-up (S&P touching 8000),  with some moonshots (like SpaceX and OpenAI) IPOs or even see mid-cycle correction bringing down S&P to 6000. That's a wide range and will be decided by Four R's... Here are my thoughts on the " Four R’s ":  Rates, Robots, Rotations, and Real Assets. 1. ...
Post a Comment
Read more

Rockets, Relics & Roaring Markets: The $4 Trillion Crossroads of 1927 and 1999

Happy (almost) Summer! After watching Kevin Warsh get sworn in at a White House ceremony two days ago, tracking three S-1 filings that could collectively hoover up more capital than every U.S. IPO since 2022 combined, and watching 26-year-old stock charts finally break to new highs — it felt like the right moment to ask the uncomfortable question out loud. Are we at a party that ends gracefully, or one that ends with the furniture on fire? The market is simultaneously flashing the neon signs of 1999  and  the orchestral excess of 1927. Most commentators reach for the dot-com playbook. I think the original Roaring Twenties is the better map. Here's why... Assembly Lines to AI Clusters Ford's River Rouge complex was the largest industrial facility on earth in the 1920s — raw iron in one end, a Model T out the other. Steel, rubber, and oil became the picks-and-shovels of the age. GE and Westinghouse were electrifying factories and homes. The infrastructure buildout  was ...
Post a Comment
Read more

Stree-Dhan vs. Oracle of Omaha!

Happy February! After another brief hibernation from the blog—partly to digest the early year volatility and partly to observe the shifting sands of global liquidity—it’s time to look at some fascinating disconnects in the market. Lately, I’ve been thinking about the "Unbeatable Asset Class." No, I’m not talking about the S&P 500 or Nvidia. I’m talking about a collective force that has quietly outperformed the "Oracle of Omaha" for over two decades. 1. The Golden Saree: Indian Women vs. Warren Buffett If you look at the performance of Berkshire Hathaway (BRK-B) since the launch of the GLD ETF (the first gold ETF) in late 2004, you’ll find a startling reality. While Buffett is the gold standard of value investing, the "Gold Standard" itself—specifically in the hands of Indian households—has been a formidable rival. Data shows that since the inception of the GLD ETF in November 2004, the total return on Gold has actually surpassed Berkshire Hathaway. I...
Post a Comment
Read more