Zynga valuation 'clearly shows we're in a bubble'

Zynga valuation 'clearly shows we're in a bubble'

By Rob Crossley

May 20th 2011 at 10:30AM

Stark warning issued by Gameloft financial boss; PopCap ponders IPO date

Stock markets and investment firms are in the grip of a new social and digital media bubble, the financial boss of a major mobile game studio has said.

Gameloft CFO Alexandre de Rochefort warned that the social games business is speeding along at a dangerous pace, fuelled with frenzied valuations of social media groups.

"I am sorry but when Zynga is worth $10 billion something is a bit strange," de Rochefort told Reuters.

"If this is not a bubble, I don't know what is,"

de Rochefort’s warning comes as global financial markets are gripped by a fresh bout of tech fever.

Zynga, which formed in 2007, is now embarking on an unprecedented acquisition spree. It has bought fourteen development outfits in twelve months.

Numerous independent valuations put the Farmville titan at somewhere between seven and ten billion dollars.

Rumours persist that the San Franciscan firm will eventually float on the stock market – an option made even more tempting by the startling growth of LinkedIn shares on its debut day on the New York Stock Exchange.

LinkedIn, which is the first of the big three social networking forms to go public, had its shares valued around $45 before its flotation, but on its first day peaked at $112, far beyond City expectations.

de Rochefort warned that the financial sector is in a social media frenzy that is already showing signs of becoming the dot-com-bust-2.0

"Lots of our US shareholders advise us to list on the Nasdaq because we'd get a share boost of about 50 per cent," he said.

"But I wonder how long this upside can last.”

The fear is that shares will climb so far beyond the true value of social game firms that a crash could trigger, with investors desperate to sell as distrust sweeps stock markets.

Yesterday, the CEO of longstanding social games firm PopCap said his firm could float in a matter of months.

"We are very much in the process of preparing a listing," Roberts said.

"We expect to be ready to be listed as early as November this year."