Zynga IPO Rated a ‘Buy’ by Guy Who’s Been Correct About Tech IPOs Before and Quotes Mark Cuban


Haven’t you heard? Zynga is the latest awesome(ly hyped) tech company to go for the IPO gold. The last big hyped tech IPO, you may have also heard of, it didn’t do so well. More than a few of the hyper-hyped tech IPOs from 2011 haven’t done so well, either. So if one of the guys who was naysaying the tech IPO euphoria correctly comes out and says to buy Zynga, we’d be interested to hear what they have to say.

Meet Richard Greenfield.

As Eric Savitz of Forbes notes, back in June, Greenfield—an analyst for BTIG— recommended against buying into the big fancy Pandora IPO, noting very astutely that:

…the revenue/earnings leverage from growing users/usage is simply not enough to scale earnings relative to the IPO’s proposed valuation.

In plain normal person speak, this means: they don’t have the potential in their current business plan to make enough money to justify the high price of their IPO. And guess what happened? Pandora’s IPO didn’t go so well.

It’s worth noting here that Greenfield’s wisdom could be theoretically applied to plenty of IPOs just like Pandora. Say, Groupon! Or maybe Zynga?

Not so much, though! Because today, as Eric Savitz writes, Greenfield reccomended Zynga as a big, fat BUY. But why? Aren’t all crazy-hyper-hyped euphoric tech IPOs the same?

Maybe not, says a guy who quotes Mark Cuban:

He quotes a Mark Cuban post in October 2010 in which Cuban asserted that “TV is the best cure for boredom…TV is the path of least resistance alternative to doing nothing.” Greenfield notes that social games are sort of the mobile boredom cure, available anywhere there’s an Internet connection….“Despite the challenges of modeling Zynga, we believe the investment opportunity afforded by the IPO range is compelling,” he writes. “Beyond the … attractive growth dynamics of social media and IP-connected devices that enable access to Zynga’s social games, Zynga’s sheer size and scale is a major reason behind our favorable view of the IPO.

And just how much does he reccomend it?

Greenfield thinks even the high end of the IPO range could yield upwards of 50% returns to investors within 12 months.

Again, translated: Zynga is big and its primarily social components creates a Scientology-like draw to its culture, which—if you invest in—will (maybe) give you a 50% return on your investment in less than a year. Which is a pretty great return. For anything. Let alone a tech IPO. But for those trying to take a bite of any Zynga and/or Tech IPO associated paranoia, fear not: Savitz also reported yesterday on an another analyst who came out with a strong “eff this noise” position yesterday. So, as far as we can tell—despite no real mention of The Baldwin Effect on the Zynga’s IPO prospects—the physics of gravity and sensible opinion might play well into the Zynga IPO, which prices tomorrow.

In other words: Get your popcorn. This one’ll be a doozy.

fkamer@observer.com | @weareyourfek

Zynga IPO Rated a ‘Buy’ by Guy Who’s Been Correct About Tech IPOs Before and Quotes Mark Cuban