Hot IPOs can have a significant impact on the valuation of existing public companies. For example, the recent Renren (NYSE:RENN) and LinkedIn (LNKD) IPOs proved to be a boon for Quepasa (QSPA) shareholders. In the days leading up to RENN's IPO, QPSA shares nearly doubled. A few weeks later, on the day of LNKD's IPO, QPSA shares rose as much as 34%.
In the coming days, Zynga, a leading social/mobile gaming vendor, is expected to file paperwork to go public. Judging by its last round of funding, its IPO could result in a $10 billion valuation. As was the case for QPSA, the media frenzy surrounding Zynga's IPO could send shares of publicly-traded social/mobile gaming vendors soaring.
Glu Mobile has already been making headway on the strength of hot games like Contract Killer, Gun Bros, Deer Hunter, and Big Time Gangsta. Its stock should also benefit from its likely addition to the Russell 2000 next month.
Gameloft (OTCPK:GLOFF) is based in Paris, but that hasn't stopped the company from succeeding in the U.S. market. It boasts hot new titles like Order & Choas Online and Fast Five, leveraging the movie's box office success.
Majesco has been moving into the social/mobile space and has a close tie to Zynga, with its upcoming game, Parking Wars 2. Based on the A&E TV series, Parking Wars 2 is the second installment of the hit Facebook game. It is being developed by Area/Code, which was acquired by Zynga in January. The game is currently in beta-testing. If the game looks like a big enough hit, Zynga could present COOL with an attractive offer to keep it for itself. Given Zynga's larger audience, a deal could greatly benefit both sides. Either way, the tie to Zynga is sure to bring attention to COOL's stock.
Like COOL, RealNetworks is making a transition into the social/mobile arena. I've covered this company on SeekingAlpha (see RealNetworks: Exceptional Value at Current Levels) and my "Stocks to Triple" series of articles for more). RNWK's Gamehouse subsidiary boasts a portfolio of over 1,000 games, including many classics. Moving these games to social/mobile platforms should come at a low-cost, providing great profit potential for RNWK. In addition, Gamehouse could be spun off in the wake of Zynga's IPO, resulting in strong gains for RNWK shareholders.
Thanks to the growing demand for social/mobile game, all three vendors have promising prospects in their own right. However, as we've seen with QPSA and others before it, a hot IPO can serve as a major catalyst for publicly-traded stocks. With Zynga set to be the next must-have offering, GLUU, COOL, and RNWK shareholders appear poised to benefit in more ways than one.
Disclosure: I am long GLUU, GLOFF.PK, COOL, RNWK, QPSA.