Both Groupon and Zynga are coming up with big IPOs. Groupon makes 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 doesn’t apply to these fastest growing companies in the world?