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***ZYNGA IPO UPDATE***

The Zynga IPO, as many of you already know, is already being talked about by some, as the most sought after IPO in the last few years. On a pure interest basis, comparisons are to be Google (GOOG:NYSE) are already being made. Especially with the recent demand for other tech related IPO’s.

As some of our followers know, we make an effort to highlight some high profile public offerings, and we give color on other lesser known investment banking deals as well, but the Zynga IPO is different, much different from other deals.

Recently, some of you have watched tech IPO’s like the LinkedIn IPO (LNKD:NASDAQ) and thePandora IPO (P:NYSE) have huge pops, but only fall back after institutions and IPO flippers came out of their allocations. The reason for the declines of the two stocks mentioned above is pretty simple. Their fundamentals don’t match the market caps for the short term. Short sellers know that even a booster shot buy recommendation from a brokerage firm can only do so much for a stock price. This is why many hedge funds short these deals when borrows become available.

Zynga’s IPO is unique though. Look at a company like Pandora, even the CEO can’t tell you when they are going to be profitable. With Zynga, it’s obviously different. Their presence on Facebook is huge and still growing. The revenues are also off the charts already and it’s not unreasonable for some to say that Zynga could eclipse the$1 billion mark in revs in the next couple of years.

Zynga’s user base is also extremely loyal even in the competitive gaming space. Games like Farmville, Cityville and Frontierville keep users coming back. Zynga’s solid brand and management also has something to do with the present valuation talk being in the $20 billion range. Keep in mind that most experts felt Zynga was valued in the $10 billion range at the time of our initial Zynga IPO profile entry.

So get ready for the hype to begin as the deal is rumored to trade in the fall. Even though Zynga’s IPO offering will be larger than some of it’s recent tech predecessors, shares will be extremely limited for retail accounts. In other words, for a deal of it’s size, Zynga will be oversubscribed to epic proportions. So please don’t be disappointed or mad at your broker if you are shutout.

Original ZYNGA IPO post below:

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Zynga IPO Gonna be Hot

San Francisco based social networking game developer Zynga is rumored to file for an IPO in the very near future.I has almost 250 million Facebook users and 4 of its most popular games are City Ville, FarmVille, FrontierVille and Zynga Poker. On Tuesday, Zynga just released it’s new game Empire and Allies. A move that some feel is geared towards creating even more interest in Zynga’s IPO stock offering.

In the past few months we have seen a slew of red hot IPO’s come to market, especially in the social networking space. LinkedIn IPO (LNKD:NASDAQ) was the latest, and despite the fact some are calling for a bubble in the space, it’s probably safe to say that the Zynga IPO will be heavily oversubscribed. Zynga already has roughly 250 million active Facebook users who frequent their games. The company has also been recently valued in the $10 billion range, and is rumored to have Morgan Stanley and Goldman Sachs in the running to be the lead underwriters.

Zynga Already has Profit which should help the Zynga IPO

The difference from Zynga IPO and some other …

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Megola Inc. (MGON:OB) has something going for it that many other penny stocks don’t. Frequently low priced stock have catalysts that the common investor simply can’t grasp in order to buy the stock. Biotech penny stocks are a common example of this problem. Especially, when the PR’s try to explain products like cancer vaccines.

Well MGON claims to help solve a problem that many Americans are concerned with. The problem is the safety of products shipped to the United States. MGON has product line named HARTINDO that is supposed to be as safe non corrosive fire inhibitor.

On 10/26/11, Megola signed a Memorandum of Understanding with High Point Enterprises of China for licensing of MGON‘s Fire Inhibitor Coating. As always, you have to be skeptical of PR’s involving penny stocks and foreign companies. However, MGON has rallied sharply today, and shares are currently up 93.55% at 0.006 cents on strong volume.

MGON could also turn into a go to trading vehicle for speculative traders every time there is a new flash on defective or dangerous products from China being sold in U.S. stores. With it’s sub penny status offering the potential for large percentage gains.

MGON Stock Stays Risky

Fundamentally speaking MGON generates 366k in revenues, but only shows 1k in total cash with 87k in debt. The company also isn’t profitable.

On a technical basis, MGON has made large percentage moves like today’s as recently as a few weeks ago. So be careful not to get whipsawed in today’s action. MGON‘s chart is difficult to read because the moves have been so choppy. There is some resistance at 0.8 cents and a little more at 0.0085. As far a support goes, 0.0045 seems to be a level where some decent buying occurred, and if all else fails, today’s open of 0.004 cents could be used as a guide too.

For now just add Megola Inc. to your penny stock list. Keep in mind that while this is super risky name, the story of MGON could catch on with consumers and receive independent press coverage.

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As many of you already know, social networking IPO’s have been red hot in the recent months, despite a broader market that has been sketchy at best. Recently, the  LinkedIn IPO (LNKD:NASDAQ) and Zillow (Z:NYSE) have made massive gains for investors who were lucky enough to get in at the offering price. IPO investors also have Zynga and Groupon to look forward to in the near future, but even these two major names pale in comparison to the mother load of all social networking stocks. Yes, of course it’s Facebook.

Now, here are a few ways to participate in Facebook by using existing equities before it comes public. The first one is Microsoft (MSFT:NASDAQ). MSFT owns stakes in many private companies, so the stake in Facebook really isn’t a surprise. Plus, MSFT has an enormous market cap already. So the Facebook position probably will be nothing more than a blip on the radar. The second company is Mail.ru (MAIL.LON), this is a name that isn’t familiar to many U.S. investors, but the company is also a large one and also probably won’t be impacted much by their impressive pre-IPO position. Mail.ru owns a little less than 2.5% of Facebook.

Now the third way to play Facebook makes a lot more sense when you think about it. Plus, the company is a name that most are not familiar with. However, when you look at GSV Capital Corp (GSVC:NASDAQ) it seems to make sense. GSVC is business development company that went public at $15 back in April, and as many BDC’s often do, shares traded down after the offering to below $10 in June. Later in the month, Michael Moe, GSVC‘s CEO and co-founder of ThinkEquity pulled of a major PR coup. Moe announced that GSVC had purchased 225,000 shares of Facebook at a cost of 29.28 per share. To put Moe’s purchase price in perspective, Facebook is worth $87.5 billion at $35 per share, and it has traded at that price on SharesPost.

GSVC files to issue 100 Million in Stock

Kate Kelly of CNBC recently reported that Facebook’s valuation could be as much as or even exceed $100 million on the IPO date and that is without counting a first day pop in the stock. So it seems safe to say at this point that Moe made a wise call on the transaction, and shares of GSVC responded trading up to $19.97 after announcing it’s Facebook stake. But, GSVC recently filed to issue as much as $100 million in stock, which is sizable considering that the company currently has a market cap of $52.5 million. This type of impending dilution has obviously weighed on shares of GSVC.

But, the purpose of this piece is not to debate Facebook’s valuation or even GSVC‘s for that matter. The purpose is to point out that GSVC will be traded on a momentum type basis leading up to the Facebook IPO. Now if this secondary offering is somehow canceled, due to market conditions, we could see a nice rally in GSVC, solely based on short covering. We could also see pure hype move GSVC higher as it did recently, and the closer we get to the Facebook IPO, the more exposure GSVCwill get, especially if Facebook resets it’s valuation higher or if Moe adds another high profile deal to the portfolio.

So add GSVC to you list of stocks to watch, but it’s probably wise to let the dust clear from the upcoming secondary offering before considering acting. Just keep in mind that GSVC has great potential …

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Most of us remember the General Motors IPO (GM:NYSE). The much sought after deal, but oddly enough, it’s now trading below it’s issue price. Will Chrysler be sought after and then simply trade flat to down after the sizzle of the IPO is gone ?

Well this is another name that has conflicting opinions. Many people who are active in the IPO feel the deal will premium based on pure name recognition. Other bulls have mentioned that Chrysler would be well received when it starts it’s road show. However, with unclear financials, potentially rising gas prices and an uncetain stock market, Chrysler IPO could have it’s work cut out

Chrysler Group CEO Sergio Marchionne mentioned last month that the Chrysler IPO might be moved into 2012. In the past, Marchionne year, he expected the IPO to come in the second half of 2011. However, if this market holds up and demand for new issues continues, Chrysler might want to take jump the gun and graps the advatangeous conditions as soon as they can.

What do you do if the Chrysler IPO does trade in 2011 ? We’ll, I touched on how to get deal stock in a prior entry, but if the roadshow goes well, this will be another one of these deals that institutions scoff up like a hot silver penny stock that just found proven reserves. Much of what is leftover after the institutuins get their piece , will go to the largest retail accounts. However, there should be some scraps left for regular accounts. Even if the deal gets hot, but getting IPO allocations is often more sizzle than steak. Let’s assume shares of Chrysler IPO perform similary to GM on it’s first day of trading and Chrysler trades at let’s say for arguments sake a $3 premium. A typical retail account managed by a larger producing broker, at a quality firm, at most, gives a smaller client 500 shares, usually it’s much less if any. And, I am taking the massive size of the potential Chrysler offering into account. Is a $1500 dollar profit that important to you ? Just to do one trade. There are penny stock scalpers who make that every day trading zombie stocks.

If you want to play the IPO market on a regular basis with your broker, it’s certainly worth it, That usually happens for clients who particpate in several offerings, and not only taking the good deals, but the clunkers too.However, pressuring him to give you stock in something like Chrysler for a quick one time flip might be more trouble than it’s worth. In that instance, it’s almost like the broker is getting pumped and dumped, and can cause undue pressure on your relationship with your financial advisor.

So check out my other IPO blog entry that explains the way the game is played in more detail, and also add Ford (F:NYSE) and General Motors (GM:NYSE) to your list of stocks. They will most likely trade in sympathy with the demand for the Chrysler IPO. Remember, shares of Ford ripped higher in anticipation of the IPO.

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