July 15, 2011
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?
To check out the model, click here or right click on the link and select Save As.