Zynga delaying IPOville?

According to the New York Post, Zynga is delaying its IPO from September to early November, due to “rocky stock markets.”

Since Zynga released its S1 documents signaling an intent to go public, the market has been volatile and US treasuries were downgraded by S&P. LinkedIn and Pandora successfully went IPO, but their current stock prices are not setting the world on fire.

The story behind the headlines, however, is the back-and-forth squabbles reportedly between Zynga and the SEC, the regulatory body that has to give the green light for any company to go public.

The New York Post reports that the SEC had issues with Zynga using non-traditional accounting practices, as well vague statements around its business, such as that a small portion of its users responsible for majority of its revenues and that a large portion of its business comes from Facebook. Zynga amended its filing and stated that less than 5% of its users pay for micro-transactions as well as divulged details on its special relationship with Facebook (which angered Facebook’s other gaming partners).

Apparently, the SEC still wants more details on how much revenue Zynga is earning per game, which is data Zynga is fighting not to divulge. Such data could shed a slightly negative light on Zynga if it shows revenues dropping for certain titles and could be valuable for any company competing against Zynga. By going public, Zynga must open the kimono to its business, but it wants to keep as much data as secret as possible (which makes logical business sense).

Aside from raising an insane amount of money and making its founders and investors rich, Zynga is not in any hurry to go public. They have over a billion dollars in the bank so they can operate as they currently do for a long, long time. Frankly, if the SEC is requesting this much level of data detail, I’d be not surprised if Zynga pushes back their IPO even later.

Pushing out their IPO too much later than November is a risky proposition as well. At some point, you have to push into the New Year because you can’t go IPO during the Christmas Holiday season. Though I’m not an expert, I would assume you would have to revise your S1 documentation again to reflect numbers based on latest operational quarter. If the numbers show growth, this is no problem. But, if the numbers drop or show a lower growth rate, that could give potential investors pause.

At some point, Zynga will have to “darn the market forces” and just go for it, or delay the IPO for a long time. Sadly for all of us reading this article, the volatility in the stock market is probably not going away anytime soon.

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