Both Groupon and Zynga are coming up with big IPOs. Groupon make us skeptical about multi-billion dollar valuation and claims because of their business model. Zyngaâ€™s model of social gaming clears some air by showing real profits on their P&L.
The social gaming firm which relies almost solely on Facebook for its revenues recently filed for S1, and had our modeling team poring through their financials for a number of days.
One aspect that is common in both the business models is that both show high probability to bankruptcy when we use Altman-Z Score on their numbers.
In Grouponâ€™s case almost all yearâ€™s Z-Scores are negative whereas Zynga has Z-Score in safe zone from bankruptcy.
Will these two so called fastest growing companies of the decade show signs of insolvency or the discriminant analysis such as Altman Z-score doesnâ€™t apply to these fastest growing companies in the world?
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Anil Bains has developed end-to-end financial models for Real Estate, FMCG, Power, Roads and Telecom Sector and released them as Open Source. He has extensive experience in the financial services, analytics and training domain. Apart from making Financial Modeling simple and accessible for the masses, Anil loves playing volleyball and has a mean spike.
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