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Zynga lowers valuation to a bargain $10bn

Virtual bumpkin game maker braces for rocky market

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Social network gaming firm Zynga may seek a lower price than expected for shares in its initial public offering, valuing the company at $10bn.

In its latest Securities and Exchange Commission (SEC) filing, the company said a third-party analysis in the third quarter had decided the company was worth $14.05bn, up from the second quarter analysis that priced the Facebook games developer at $13.98bn.

Zynga is planning to file its intentions with the SEC on Friday for an initial float of 10 per cent of the firm, which will bag around $900m based on a range of $8 to $10 per share, sources close to the process told Reuters.

The IPO for the gaming firm, famous for virtual bumpkin diversion Farmville, will then be priced on 15 December.

Zynga's market debut follows Groupon's just a few weeks ago and precedes the highly-anticipated launch of Facebook, which is rumoured to be on the slate for next year.

The market has been fairly fickle with internet company stock of late, dropping new entrant Groupon to well below its initial pricing and even easing on well-established shares like Amazon's.

The $900m Zynga is hoping to get from going public is a little shy of the $1bn it was aiming for in July this year, which is no doubt a nod to the volatile conditions at the moment. These are partly spurred by the gloomy global economic climate and partly by the unproven quality of the business models for the new crop of social media and internet firms.

For Zynga, the concerns are around its dependence on Facebook, which is the main platform for its games. However, the firm is profitable, making its money from the virtual items players buy within its free games.

In the three months to the end of September, the company made a net income of $12.5m, a healthy haul, but less than half of what it made in the third quarter of 2010 as it delves into its coffers to develop new games. ®

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